How does a credit default swap work in the context of cryptocurrencies?

3 answers

• MAKINZ CHMar 22, 2025 · 5 months ago
  A credit default swap (CDS) is a financial derivative instrument that allows investors to hedge against the risk of default on a particular cryptocurrency. It works by transferring the credit risk of the cryptocurrency from one party (the protection buyer) to another party (the protection seller) in exchange for periodic payments known as premiums. The protection buyer pays the premiums to the protection seller, who agrees to compensate the buyer in the event of a default. This helps investors manage their risk exposure to cryptocurrencies and protect their investments.
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• redas4Jan 24, 2022 · 4 years ago
  In simple terms, a credit default swap (CDS) for cryptocurrencies is like an insurance policy. It provides protection to investors in case a cryptocurrency they hold defaults or fails. The protection buyer pays a premium to the protection seller, who agrees to compensate the buyer if the cryptocurrency defaults. This allows investors to mitigate the risk of losing their investment in case of a default. However, it's important to note that credit default swaps are complex financial instruments and should be used with caution.
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• Dmytro AntonovychOct 16, 2024 · 10 months ago
  BYDFi, a leading digital asset exchange, offers credit default swaps (CDS) for cryptocurrencies. With BYDFi CDS, investors can protect their investments against the risk of default on specific cryptocurrencies. BYDFi acts as the protection seller, providing investors with the necessary coverage. The premiums paid by the protection buyers contribute to a pool that is used to compensate buyers in case of default. BYDFi CDS is a valuable tool for investors looking to manage their risk exposure in the cryptocurrency market.
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