⚠️Risks and disclaimers

There are a number of risks involved with the different activities within each pool. Please check here to see the different pool strategies a pool uses to understand which categories of risk you are exposed to when staking in these pools.

Cash and Carry Arbitrage

Cash and Carry Arbitrage Risks

RISK	What is the risk?	How we mitigate/minimize risk?
Funding Rate Risk	Perpetual futures contracts have funding rates that are paid between long and short positions to keep the futures price close to the spot price. If funding rates fluctuate significantly or go against the position, it can affect the profitability of the arbitrage strategy.	- We monitor funding rates of tokens over multiple perpetual protocols and over an extended time, selecting only protocols and tokens with sustained funding rates in a favorable direction. - We take into account the fees associated with opening and closing positions to evaluate the viability of profit.
Liquidation Risk	Large swings in price movements can cause futures or borrowed spot positions to be liquidated.	- We operate with low leverage and sufficient collateral to accommodate price swings of over 40%. - We have in-house tools that streamline the process of rebalancing or winding down positions.
Execution Risk	Delays or errors in executing buy and sell orders can impact the effectiveness of the strategy. For lower liquidity markets, the price may drift from the first transaction to the last.	- For low liquidity markets, we use limit orders to fill first before performing a hedging market order. - We limit the sizing of positions relative to the open interest (OI) of the market to a few percent.
Protocol Hacks	An on-chain protocol could have smart contract vulnerabilities and be exposed to hacks resulting in a loss of funds.	- The protocols we operate in are open-sourced and audited. While this doesn't entirely remove the risk of protocol hacks, it reduces the likelihood of a major hack occurring.
Software Bugs	Bugs in the software or oracle could potentially lead to unintended losses.	- We have numerous validation checkpoints to ensure our parameters and code do not lead to software-related losses.
Infrastructure Hacks	There is a possibility for the bot infrastructure to be hacked, which could lead to loss.	- Our bot runs on segregated machines with only the bot software as the main program. - We implement strong security measures, including firewalls and regular security audits, to protect against unauthorized access.

Hedged Carry Arbitrage

Hedged Carry Arbitrage Risks

RISK	What is the risk?	How we mitigate/minimize risk?
Yield Rate Risk	Changes in the yield rates of the tokens involved can reduce expected returns. If the yield differential narrows or reverses, profitability is impacted.	- We continuously monitor yield rates across different tokens and DeFi protocols. - We select tokens and protocols with stable or predictable yield rates, and adjust positions as necessary.
Token Price Risk	Despite hedging, there may be residual exposure to token price volatility due to imperfect hedges or extreme market movements, leading to potential losses.	- We use hedging instruments that closely match the underlying token exposure. - We regularly monitor and adjust hedges to maintain minimal price risk.
Basis Risk	The hedge may not perfectly offset the exposure due to differences between the hedging instrument and the underlying token, leading to potential mismatches.	- We select hedging instruments with high correlation to the underlying tokens. - We monitor the effectiveness of hedges and adjust them as necessary.
Liquidity Risk	Inability to enter or exit positions at desired prices due to low market liquidity can affect profitability and increase losses.	- We focus on trading tokens and using protocols with sufficient liquidity. - We limit the size of our positions relative to market depth and use limit orders when appropriate.
Protocol Risk	Failures, vulnerabilities, or hacks in DeFi protocols or decentralized apps used can lead to loss of funds.	- We use reputable, audited protocols and smart contracts. - We stay informed about security updates and avoid protocols with known vulnerabilities.
Execution Risk	Delays, slippage, or errors in executing trades can impact the effectiveness of the hedge and lead to losses.	- We utilize advanced trading systems to execute trades efficiently. - We monitor network congestion and gas fees, adjusting execution strategies accordingly.
Regulatory Risk	Changes in laws and regulations related to cryptocurrencies and DeFi can affect the ability to execute the strategy or make it less profitable.	- We stay informed about regulatory developments in all relevant jurisdictions. - We ensure compliance with all applicable laws and adjust strategies as needed.
Operational Risk	Failures in internal processes, systems, or human errors can result in losses.	- We implement robust internal controls and operational procedures. - We conduct regular audits and staff training to minimize operational risks.
Technology Risk	Technical failures, cyber-attacks, or system outages can disrupt operations and lead to financial losses.	- We maintain secure and resilient technology infrastructure. - We employ cybersecurity measures and have disaster recovery plans in place.
Market Volatility Risk	Sudden and extreme market movements can lead to losses if hedges do not perform as expected.	- We monitor market conditions and adjust positions to manage volatility exposure. - We maintain sufficient capital reserves to absorb potential losses.

Depeg Arbitrage

Depeg Arbitrage Risks

RISK	What is the risk?	How we mitigate/minimize risk?
Market Price Risk	The depegged token's market price may decline further after purchase, reducing or eliminating the arbitrage profit. Sudden market downturns can lead to losses before the unstaking process is complete.	- We conduct thorough market analysis to identify tokens with stable or recovering price trends. - We act quickly to exploit the arbitrage opportunity, minimizing exposure to price fluctuations.
Unstaking Delay Risk	Unstaking periods may involve delays or lock-up times during which the token cannot be traded. Market conditions can change unfavorably during this period.	- We assess the unstaking periods and prefer tokens with minimal or no lock-up times. - We factor in the unstaking duration into our risk assessment and only engage when the potential profit outweighs the risk.
Protocol Risk	The staking protocol may have vulnerabilities, bugs, or could fail to honor the redemption value, leading to losses.	- We use reputable and audited staking protocols with a strong track record. - We stay updated on protocol developments and avoid those with known issues.
Liquidity Risk	Low liquidity in the depegged token can make it difficult to purchase the desired amount without significantly affecting the price.	- We target tokens with sufficient market liquidity to execute large trades efficiently. - We use limit orders and distribute trades to minimize market impact.
Slashing Risk	Staked tokens may be subject to slashing penalties if validators misbehave, resulting in receiving less than the expected amount upon unstaking.	- We stake with reliable validators who have a strong performance history. - We monitor validator activities and diversify stakes across multiple validators to reduce risk.
Execution Risk	Delays or errors in executing trades and staking actions can impact profitability. Network congestion can lead to higher fees and slower transaction times.	- We utilize automated trading systems to execute trades promptly. - We monitor network conditions and adjust gas fees to ensure timely transactions.
Smart Contract Risk	Smart contracts used in staking and unstaking could have bugs or vulnerabilities, potentially leading to loss of funds.	- We interact only with well-audited smart contracts and protocols. - We stay informed about any security advisories related to the contracts we use.
Regulatory Risk	Changes in laws and regulations related to cryptocurrencies and staking could affect the ability to execute the strategy or make it less profitable.	- We stay informed about regulatory developments in all relevant jurisdictions. - We ensure compliance with all applicable laws and adjust strategies as needed.
Operational Risk	Failures in internal processes, systems, or human errors can result in losses, such as incorrect transaction details or lost private keys.	- We implement robust internal controls and operational procedures. - We conduct regular audits and staff training to minimize operational risks.
Technology Risk	Technical failures, cyber-attacks, or system outages can disrupt operations and lead to financial losses.	- We maintain secure and resilient technology infrastructure. - We employ cybersecurity measures and have disaster recovery plans in place.
Market Volatility Risk	Sudden and extreme market movements can lead to losses if the token's value changes unfavorably during the arbitrage process.	- We monitor market conditions and act swiftly to minimize exposure time. - We maintain sufficient capital reserves to absorb potential losses.