Risks

Smart Contract Risks

Our strategies, like many in the DeFi space, rely on smart contracts. Despite our best efforts in development and security audits, there is always a possibility of unforeseen vulnerabilities. The protocols and smart contracts we utilize, such as those related to the implementation of our Leveraged JLP Neutral Strategy, HYPE Neutral Strategy, and LST Fixed Income Strategy, are designed with security in mind. However, the complex nature of blockchain technology means that potential exploits or bugs could exist within the code. If such issues were to occur, they could potentially lead to losses of funds or disruptions in the execution of our strategies.

Hedging Risks

In our pursuit of providing stable returns through hedging mechanisms, there are associated risks. For example, in the case of our strategies that involve hedging against price movements, such as the delta-neutral aspects of our offerings, extreme market volatility can pose challenges. Sudden and significant price swings in the underlying assets, like those related to the HYPE token or the assets involved in our LST strategies, can impact the effectiveness of our hedges. This may result in imperfect offsetting of positions and potentially lead to losses that deviate from our expected risk profiles. Even with our continuous monitoring and adjustment processes, the inherent unpredictability of highly volatile markets means that users should be aware of the potential for hedging to not perform as expected.

Operational Risks

We have implemented various procedures to ensure smooth operations, but there are still potential operational risks. Delays or inaccuracies in data retrieval, which is crucial for making informed decisions about leverage adjustments, hedging, and overall strategy execution, could occur. For instance, in the implementation of our strategies, if the data used to calculate funding rates, asset prices, or other key metrics is incorrect or delayed, it could lead to suboptimal decisions. This might impact the performance of our vaults and the returns generated for our users. We strive to mitigate these risks by using reliable data sources and redundant systems, but the possibility of operational glitches remains.

Liquidity Risks

Liquidity is a key concern in the DeFi ecosystem. In situations where the markets experience stress or low trading volumes, there may be challenges in executing trades promptly and at favorable prices. For our strategies that involve converting between different assets, such as the process of leveraging JLP or managing LST positions, if there is insufficient liquidity in the relevant markets, it could lead to increased slippage. This means that the actual execution price of a trade may be less favorable than expected, reducing potential returns. Additionally, during periods of high demand for withdrawals, if the underlying liquidity is not sufficient, it could result in delays or restrictions in users being able to access their funds.

Market Risks

External market factors can have a significant impact on our strategies. Changes in market conditions, such as fluctuations in interest rates, shifts in the overall sentiment towards cryptocurrencies, or unexpected regulatory developments, can all influence the performance of our offerings. For example, in our LST Fixed Income Strategy, if there is a sudden change in the demand and supply dynamics of the Liquid Staking Tokens or the broader market in which they operate, it could affect the yields we are able to generate. Similarly, in our hedged strategies, changes in the correlation between different assets or the overall market volatility can lead to deviations from our projected returns. It is important to note that while we have implemented advanced risk management techniques and continuously monitor and adapt to changing market conditions, these risks are an inherent part of operating in the DeFi space. Users should thoroughly understand these risks and carefully assess their own risk tolerance before engaging with our platform and its strategies.