Umoja Raises $2M to Eliminate Crypto Losses

Context: This article was published 1/11/24. We’ve raised more since then and launched Beta V1.

Umoja, founded by Robby Greenfield, the former Head of Social Impact at ConsenSys, has raised $2M from the likes of Quantstamp, Blockchain Founders Fund, Orange DAO, Hyperithm, Psalion, and Blizzard the Avalanche Fund among others. This funding helps to introduce DeFi’s first asset risk management primitive, enabling anyone to insure their market losses just as a multi-billion dollar hedge fund would. Its goal? To facilitate decentralized hedging of virtually any real-world asset risk – whether in crypto, fiat, digital bonds, real estate, or commodities – representing a $500 trillion market opportunity.

Deemed the “Yearn Finance for Risk,” Umoja enables anyone to hedge their market losses to truly benefit from the oncoming bull run.

Aside from being one of extremely few, venture-backed founders of color - championing Umoja with the support of Coinbase Ventures, Quantstamp, Blockchain Founders Fund, 500 Global - Greenfield’s blockchain career has most notably been in the social sector, where he served as ConsenSys’s former Head of Social Impact. In the role, Robby co-led some of the world’s first blockchain-for-good use cases, such as the world’s first stablecoin-based humanitarian aid program with Oxfam International, receiving the U.S. State Department’s first blockchain grant to further factory worker wellness, and helping co-found the Ethereum Foundation’s Devon Scholars program.

But how did Umoja go from global humanitarian aid to asset-hedging? For Greenfield, it all started in Nairobi, Kenya. 

Expensive foreign exchange (FX) depreciation makes foreign investment extremely difficult. The result is that the cost of capital in some of the world’s most promising, but frequently under-resourced economies is very high. Revenue generating MSMEs across the global south - who all deserve access to credit, simply can’t afford it, as investors want risk-adjusted returns. “This isn’t just an FX issue - for the average consumer, business, and investor, hedging asset risks is a tiresome effort. The Umoja protocol was created to enable anyone to hedge the risk of everything to secure their financial wellness, ” Greenfield remarked.

Greenfield is not new to the Web3 ecosystem having been in the market since 2011 and even starting his own small crypto hedge fund. 

“Crypto hedging is only the beginning. Our vision is to hedge any digital asset, so that anyone can affordably hedge their risks just like a multi-billion dollar hedge fund,” Robby stated. 

"We're thrilled to support Umoja's innovative approach to decentralized hedging, which we believe will redefine risk management across a spectrum of assets," said Aly Madhavji, Managing Partner of Blockchain Founders Fund.

Retail Pays for Crypto Winter Losses

Greenfield’s not wrong. In 2022, the cryptocurrency market saw a sharp downturn, resulting in over $1.8 trillion in losses. Notably, the Terra/Luna collapse in May 2022 and the FTX bankruptcy in November 2022 contributed to significant declines, with larger investors benefiting at the expense of smaller ones, as reported in the February 2023 BIS Bulletin (No. 69).

Despite the anticipation of an upcoming crypto bull run, fueled by prospects of BTC and ETH Exchange Traded Futures (ETF) approvals and price forecasts ranging from 268% to 1,300% increases, the cryptocurrency markets are expected to maintain their characteristic volatility and unpredictability. This situation is likely to persist until regulatory and institutional developments catch up with the industry.

Historically, retail traders haven't had the tools to eliminate their market losses like that of their 'crypto-whale' counterparts. "Hope and HODL" has been the resounding investment strategy of millions of token holders, and many have lost their livelihoods because of this. 

Umoja is excited to introduce a new, simple way to automate market-loss protection for anyone that needs it, starting with the world's two most popular cryptocurrencies, BTC and ETH.

Umoja: The Yearn Finance for Risk 

Umoja decentralizes access to market hedging strategies so that anyone can minimize their losses and better protect their assets. Similar to Yearn Finance, users may vest capital to establish a hedge position across a variety of markets, from BTC to ETH. Instead of accruing yield via optimized strategies, Umoja’s strategies focus on covering the losses that the user incurs from the particular asset, while doing so more simply, affordably and flexibly compared to traditional options. 

There are many ways sophisticated traders mitigate their risks. Typically, they rely on derivative products like forward, futures, and options, to cost-effectively manage their exposure to avoid unnecessary losses. 

However, for the common retail trader, such resources aren’t readily available. This is often because: 

  • Most people can't spend all day trading. 

  • Derivative markets are complex. 

  • Crypto derivatives, in particular, are very expensive. 

Quantitative traders and hedge funds cost-effectively minimize their risks all the time with ease. The truth is, when the market is down, retails are the ones that pay for it. 

Umoja gives the average person, business, or investor access to hedge fund-level risk mitigation strategies so that they can better protect themselves. To start, Umoja will be a CeFi platform for its Alpha and Beta release, and then introduce its protocol in Q2 FY24.  

On the Road to Hedging Everything 

Hedging options for real-world assets such as fiat currency, bonds and real estate are currently limited, leaving investors in these significant markets vulnerable to risks from economic changes and interest rate fluctuations. The FX market is $252 trillion alone, settling nearly $6 trillion per day. Yet, most international businesses cannot afford to hedge their currency risks due to the high cost and complexity of doing so. Similarly, real estate and bond markets offer few protective measures against market instability. This gap highlights the urgent need for innovative risk management solutions.

By converting these assets into digital tokens on a blockchain, tokenization brings enhanced liquidity and divisibility, paving the way for more effective hedging strategies via protocols such as Umoja in traditionally illiquid markets. This breakthrough promises to equip investors in these sectors with tailored hedging tools, comparable to those available in more fluid markets, fundamentally transforming risk management across diverse asset classes.

Umoja Labs 

Umoja Labs is a  fintech company focused on digital assets that uses software for real-world use cases for cross-border payments and asset management. Umoja Labs has deployed their products to facilitate digital humanitarian aid programs with the likes of Oxfam, Care International, and Hope for Haiti, as well as providing affordable MSME lending and asset hedging for those that need it most.  

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