What is convergence finance?

Launched in 2021, Convergence Finance is a decentralized interchangeable assets protocol designed to bridge real-world asset exposure with the liquidity of decentralized finance ( DeFi ). It essentially allows DeFi participants to gain exposure to real-world assets.

What is difference between convergence and divergence?

Divergence indicates that two trends move further away from each other while convergence indicates how they move closer together. Divergence occurs when the price of an asset and an indicator move away from each other. Convergence happens when the price of an asset and an indicator move toward each other.

What is convergent price?

Convergence is the movement of the price of a futures contract toward the spot price of the underlying cash commodity as the delivery date approaches. Convergence is the movement in the price of a futures contract toward the spot or cash price of the underlying commodity over time.

When does the principle of convergence apply?

The principle of convergence also applies when a commodity futures market is in backwardation, which happens when futures contracts are trading at a discount to the expected spot price. In this case, futures prices will appreciate (or the price of the commodity falls) as expiration approaches, until the prices are nearly equal on the delivery date.