We recently talked about the problem of cryptocurrency volatility, and the need for a solution that not only protects users from any possible downside, but also ensures they retain the same incredible upside potential characteristic of cryptocurrencies.
But until the advent of Bumper, such an option simply didn’t exist. Instead, users were relegated to using flawed solutions or workarounds that were either costly, inefficient, or simply difficult to get to grips with. These solutions have cost cryptocurrency holders billions of dollars in lost profits by forcing many holders to exit their positions prematurely.
With the advent of Bumper, you get the best of both worlds. Not only can you guarantee the price of your assets, but you can also benefit from any price improvement that comes during your policy period. Here’s how it works.
- First, you select which asset to protect, choose the amount, and then select the protection floor — which is the minimum value your asset can fall to before Bumper prevents any further loss, e.g. protect 100% of your holdings at 90% of their USD value.
- You’ll then be prompted to confirm the policy. This will entail staking BUMP tokens and locking up your assets. You’ll be credited 1:1 with a fully-liquid bumpered version of your assets (in this case 10 bETH). You are now protected.
- Your bumpered tokens can then be sold, traded, or used within the broader DeFi landscape, e.g. staked in yield farms, used as collateral, provided as liquidity, etc — all while safe in the knowledge that you’re protected.
- In the final step, you redeem your policy either above or below the price floor by sending back your bumpered tokens and paying the policy fee (which is deducted from the initial sum). You’ll also receive the BUMP you staked back, in addition to any accrued bonus.
Below, we take an in-depth look at the four main options available to Bumper users and when these options might be best applied.
1. Redeeming Above the Price Floor
Redeeming above the price floor should be the goal of every Bumper user, since it invariably means that you take away more than the fixed minimum amount as specified by your protection policy.
Your assets may even be worth more than they were when you purchased protection since Bumper retains your upside exposure.
After redeeming above the price floor, you will receive the current market value of the asset you initially protected in its original form. For example, for a policy where you protected 100% of your portfolio at 90% of its value, you’ll receive 100% of your portfolio back when you end your policy — e.g. if you protected 100 ETH at a price floor of 90%, you’ll still have 100 ETH after the policy ends.
2. Redeeming Below the Price Floor
This is where Bumper really shines. Since Bumper is built to protect your assets if their value falls below a pre-configured threshold, you’ll minimize your losses when redeeming below the price floor.
Let’s say you’ve taken out the following protection plan: 10 ETH with an initial value of $2,500 each (for a total of $25,000) protected at a minimum price floor of 90%. ETH then begins to tank, losing 30% of its value over several days.
When it comes to calling in your policy, you’ll receive 90% of the initial value of your protected ETH. That’s 90% of $25,000 = $22,500 — paid out in USDC. In total, you’ve capped your losses to 10% (plus the nominal Bumper fee), whereas regular market participants would have lost up to 30%.
Note: When redeeming below the price floor, you can take your payout in any of a range of supported cryptocurrencies, such as ether (ETH) and USD Coin (USDC).
3. Leaving Your Assets Protected
We’ve designed Bumper to allow users to enter and exit a protection policy quickly and easily — whenever the need arises you can jump into a plan and then redeem whenever you like. After the two-week minimum period, contracts are renewed on a rolling basis and can be redeemed at any time.
With Bumper, you only pay for the time you are protected. There are no lengthy lock-in periods and no penalties if you want to jump in and out of a plan. Once you redeem your policy, the cost of your plan will be pro-rated and deducted from your payout.
If you wish to keep your policy going, you’ll simply be charged the daily protection fee, as shown when you originally take out the policy and shown in your Bumper dashboard.
4. Redeem and Re-Protect At a Different Price Floor
In some circumstances, you may wish to change the price floor of your protection plan — i.e. if you want to reduce your costs by lowering the price floor, or increase your protection by raising it. In either case, you will need to redeem your plan and then enter a new policy.
Bumper gives you the flexibility to quickly change your plan as or when your needs demand it. Think the market is looking strong? Consider lowering the floor to cut costs. If it’s looking shaky, then a higher price floor can give you peace of mind.
Entering and exiting a protection plan can be a viable part of your investment strategy, since it also allows you to efficiently capitalize on price fluctuations — e.g. if you capitalize on a transient dip by redeeming your policy at the base of the dip (locking in the difference between the bumpered price and current price as gains), before re-protecting at this price before the market returns to the upside.
Making the Most Of Bumper
Bumper is an innovative solution to the problem of cryptocurrency volatility. As with many novel solutions, the full potential of Bumper will likely be unraveled over time, not just as a result of improvements and further developments on our side, but also because of the ecosystem that develops around it.
Since Bumper is designed to be composable within the broader DeFi landscape, you’ll have the opportunity to use your bumpered assets elsewhere — such as for liquidity mining, collateral, and trading. How will you make the most of the opportunities it provides?
Disclaimer: All product previews are non-final and subject to change.
About Bumper
Bumper protects the value of your crypto using a radically innovative DeFi protocol. Set the price you want to protect and if the market crashes, your asset will never fall below that price. Importantly, if the market pumps, your asset rises too.
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