Hedging
Hedging Real-World Risks
Using prediction markets as insurance for your life or business.
Prediction markets are not just for gambling; they are powerful tools for risk management.
Example 1: Currency Risk (Forex)
You are a business owner in Europe, but your suppliers are in the US. You are worried the Euro will crash.
- Market: "Will EUR/USD drop below 1.05?"
- Hedge: You buy "Yes".
- Result: If the Euro crashes, your business costs go up, but your Polymarket bet pays out, offsetting the loss.
Example 2: Climate Risk
You are a farmer or event organizer. Rain will ruin your revenue.
- Market: "Will it rain in [City] on [Date]?"
- Hedge: Buy "Yes".
- Result: If it rains, you lose ticket sales but win the bet.
Example 3: Crypto Portfolio
You hold a lot of Ethereum. You are worried about the SEC suing the Ethereum Foundation.
- Market: "Will the SEC sue Ethereum Foundation in 2024?"
- Hedge: Buy "Yes".
- Result: If the lawsuit happens, ETH price might dump, but your prediction market shares will 10x.