| The latest gray area of the crypto market that’s causing a stir is the hedging of locked token positions. Such trades involve venture capitalists and other types of investors working with specialist firms to book profits on tokens that cannot yet be traded in the open market because they’re subject to lock-ups. While it’s been going on for a while, the practice appears now to have gotten big enough to attract the attention of a broader audience on social media platforms like X. Broadly, there are two ways to look at this. On the one hand, you can nod along and say: “That’s sensible risk management if ever I’ve seen it. Venture firms hold billions of dollars in these assets and are under pressure to start producing tangible returns. If they simply sit on their hands and wait until their tokens vest, there’s a fair chance their paper gains will be washed away in a sudden gush of selling pressure.” On the other, hedging of this kind can be seen as undermining the project that issued the tokens in the first place — especially if it’s done without permission. Jose Maria Macedo, a partner at Delphi Digital, certainly seems to think so. And here’s a major problem: Determining exactly who is hedging what -- and whether they’re doing so with permission -- is tricky. There are many ways to skin this particular cat. The transfer of a so-called Safe Agreement for Future Tokens requires the express permission of the issuer. However, another way to hedge locked tokens is through forward contracts. And when such a derivative is involved, “the underlying token position isn’t touched and stays under the investor’s ownership, so permission to transfer is not in scope,” said Will Leung, head of partnerships at market maker Caladan.
How then to separate out the prudent from the murky? Perhaps crypto projects will choose to follow Macedo’s advice, naming and shaming what they perceive as bad behavior. Or they may look to new products. Since Bloomberg’s Tuesday report on this topic, two teams have reached out to share details of projects designed to cure what ails the market for locked tokens. One named CodeStream supports early-stage blockchain projects with strategic incentives that help them to grow while also allowing investors to access liquidity without lockups -- primarily through mining and the commitment of compute resources.
Another, SemiLiquid, is a still-stealthy institutional exchange that transforms locked tokens into tradable derivatives, enabling high-frequency trading and offering investors a way to monetize locked tokens without breaching vesting schedules. | 
