The stablecoin DAI can be used to hedge crypto investments.

True. One could exchange DAI into fiat-currency which essentially means that you cash out dollar by taking DAI. This hedges against volatility in ERC 20 token. Second hedging method: one could lock into DAI savings rate (DSR) contract. This earns an interest rate. However, this interest rate is lower than the stability fee, it hedges (partly) against each other