They always hedge, but not in crypto, and definitely not that scale.
De-Fi is blowing up because there are consistent ways to make money. When you lend your money to a bank, they pay you a modest sum of 0.01% interest. In crypto, you can find lending pools that pay 5%, 20%, even 70% and if you're ballsy enough, you could go jump into ones that pay 1000% (those are short lived and inconsistent). The De-Fi world is challenging people reassess banks and their purpose of storing their wealth.
And I am aware there's rigging in crypto, the BTC conveniently crashes when Chainlink is about to hit a milestone price point or ATH without fail for over 2 years. But is that enough to scare me away from seeing the gamebreaking potential in smart contracts and waste a once in a lifetime opportunity to witness this change the world and become a billionaire in the process? Heck no.
That's not a large scale at all for institutional investors. The rates on those lending pools are high because of the risk involved. It's not magic.