Financial tools, even in the era of DeFi haven’t changed that much. Take exchanges, there have been innovations around order books and AMMs but the trading experience has largely remained unchanged, so too has the terminology and in many ways so have the trading strategies that are executed.
Traders use technical analysis to predict future price directions and then place positions based on their long or short thesis, using instruments such as Spot, Futures, Perps or Options.. Bumper fundamentally changes this.
Bumper is a DeFi hedging tool which provides price protection and trading opportunities from downside volatility. Although Bumper shares some similarities with Stop Losses, Options Desk and insurance policies, it offers the trader new functionality and is radically different under the hood.
New tools re-write the trading handbook and offer new ways to generate alpha. Below we look at a number of ways that traders can use Bumper to trade, hedge, generate yield and protect from downside volatility whilst capitalising on the upside. Each strategy allows them to accumulate more of their favourite assets, whichever direction the market goes.
Bumper provides two functions that can underpin novel trading strategies.
With Bumper, you simply choose a price floor (similar to a strike price) for your crypto assets and a protection term (like an expiry date). If market prices drop, your asset's value will never fall below this floor. However, if the market surges, your asset's value rises with it. Utilise a simple Bumper Hedge position to protect against downside, while still having exposure to upside.
Bumper provides a sustainable way for liquidity providers to earn yield by depositing stablecoins and assuming some of the risk from buyers of protection. For their part in the market they derive their yield directly from the premiums paid by hedgers. With highly attractive real yields and additional token incentives, Bumper on average generates enhanced returns compared to DeFi staking and options desks.
Estimated Yield 3-18%
The simplicity and flexibility of Bumper enables traders to be more successful whichever way the market moves, below we introduce strategies and tactics to beat the market with Bumper.
Lets dig in…
You’re short-term bearish but long-term bullish.
As a Trader expecting short-term downside volatility, deposit the asset into Bumper with a defined floor price (up to 99%) and timeframe (as little as 7 days). If the downside price movement plays out, traders can claim USDC to the full value of their floor price, then re-accumulate the asset at a lower price and ride longer-term gains to the upside.
You're long-term bullish but want to hedge against some potential short-term price correction.
As a Trader you deposit the asset into Bumper, you own the asset and you’re long, but have protection against the downside. If the price rides higher you're only charged a diminishing premium streamed daily based on market volatility and importantly have peace of mind with the downside hedge. If the correction does play out at the end of your term you're returned USDC at the protected price.
Price has pumped on an asset you hold, you want to lock in profits but also retain exposure to further upside. As a trader, you lock in profits with a Bumper hedge position following a pump in price. If the price rides higher you still own the asset and ride those gains higher, if a correction does play out, at the end of your term you're returned USDC at the protection price.
The market appears to be bullish, but pullbacks are expected and protection is required to maximise profits.
As a Trader moving with the upwards momentum of the market, you take a Bumpered position to protect at a floor and, once you feel the upwards movement has breached a key resistance zone, cancel your position and set another floor at a higher point, securing that support/resistance level.
If a downwards move occurs and the new support is properly breached, once out of your policy then a claim will act as an excellent trade-out at the top. Use the newly acquired stablecoin funds to buy back the asset at a cheaper price
Rinse and repeat. If the price keeps going up then refer to Step 1.
You're long-term bullish on ETH and have it staked on Lido. Instead of re-staking your stETH in Balancer or Pendle for another 3-5% annual APR, play the accumulation game and trade your stETH using Bumper. Trade-up your yield-bearing assets. Use the 'Short Accumulation' or 'Trailing Protection' strategy above to trade downside volatility and re-buy cheaper stETH. Each successful accumulation trade will potentially be 2-10%, rinse and repeat 5-10 times through the year for massive compounding trade exposure instead of re-staking stETH for a low APR.
Bumper is unique in the sense that it provides positive PNL exposure whatever way the market moves. Using Bumper as a consecutive hedge utilises the accumulation and trailing protection strategies detailed above in a back-to-back fashion.
Eg. Taking a 99% floor, 7 day position. If the price has dropped claim USDC at the floor price and re-buy the asset at lower prices then repeat the 99% 7 day position. As prices rise and fall you benefit from accumulating more of the asset and then the rise in prices.
Back testing shows a performance gain vs the market in 30/60/90 day strategies using 7 day term and high 99% floor of up to 155% gain vs market growth. (ref: Oct-Nov ‘23 - ETH market up 9%, versus 8 consecutive Bumpered trades were 26% up).
Bumper gives traders access to a new toolbox of functionalities and strategies that is not limited the tight constraints found in Options platforms or reliance on sufficient liquidity to fill orders in Futures & Perps.
Smart traders will naturally seek out innovative ways to beat the market, navigating to more cost-efficient and effective tools. Bumper rewrites the playbook, employing new strategies which are more effective and less reliant on short term directional calls.
Disclaimer:
Any information provided on this website/publication is for general information purposes only, and does not constitute investment advice, financial advice, trading advice, recommendations, or any form of solicitation. No reliance can be placed on any information, content, or material stated on this website/publication. Accordingly, you must verify all information independently before utilising the Bumper protocol, and all decisions based on any information are your sole responsibility, and we shall have no liability for such decisions. Conduct your own due diligence and consult your financial advisor before making any investment decisions. Visit our website for full terms and conditions.
Even seasoned investors sometimes find it challenging to maximise their holdings amid market volatility. This past month, Bitcoin’s price movements have exemplified this unpredictability, ranging from $50,000 to $66,000. This has tested the strategies of many traders, emphasising the need for a more reliable approach to managing crypto value.
Reflexivity Research, co-founded by Anthony Pompliano and Will Clemente, has lauded Bumper as a transformative force in the DeFi sector in their latest report. Their deep dive into Bumper’s capabilities underscores why this innovative platform is gaining traction among crypto traders and yield-seekers alike.
