Risk Factors

Market-Making Risks

Trading Losses 📉

Market-making strategies can lose money
Volatile market conditions may impact returns
No guarantee of positive performance
Past performance doesn't predict future results

Impermanent Loss 🔄

Providing liquidity may result in impermanent loss
Price divergence between paired assets
Mitigated by frequent rebalancing

Competition 🏁

Other market makers reduce available spreads
Algorithmic trading competition
MEV (Maximum Extractable Value) attacks

Liquidity Risks

Withdrawal Delays ⏰

Only weekly withdrawal windows
Cannot access funds immediately
Emergency situations not accommodated
Sunday settlement dependency

Large Withdrawal Impact 📊

Big withdrawals may impact NAV calculation
Forced liquidation of positions
Potentially reduced returns for remaining users

Technology Risks

Smart Contract Risk 🔐

Code bugs or exploits possible
Upgradeable contracts carry admin risk
External dependency failures
Oracle manipulation attacks

Keeper System Risk 🤖

Automated settlement dependency
Keeper failure could delay operations
Off-chain infrastructure requirements

Base L2 Network Risks

Bridge Risk 🌉

Base L2 to Ethereum bridge vulnerabilities
Sequencer downtime or censorship
Rollup technology risks

Network Risk 🌐

Base network outages
High gas fee periods
Transaction congestion

Regulatory Risks

DeFi Regulation ⚖️

Evolving regulatory landscape
Potential protocol restrictions
Jurisdiction-specific limitations
Tax implications vary by location

Compliance Changes 📋

KYC/AML requirements may be imposed
Geographic restrictions possible
Feature limitations may apply

Operational Risks

Team Risk 👥

Key person dependency
Development team changes
Operational mistakes

Infrastructure Risk 🏗️

Server downtime
Database failures
API service interruptions

Financial Risks

Leverage Risk 📈

No leverage currently used
Future strategy changes possible
Margin call scenarios (if applicable)

Counterparty Risk 🤝

CEX exchange failures
Third-party service providers
Custodial risks

Risk Mitigation

Protocol Level

Regular security audits
Multi-signature controls
Emergency pause mechanisms
Diversified strategy approach

User Level

Only invest what you can afford to lose
Understand the technology
Diversify across protocols
Monitor your positions regularly

Risk Assessment

Risk Type	Likelihood	Impact	Mitigation
Trading Loss	Medium	Medium	Diversification, Risk Controls
Smart Contract	Low	High	Audits, Testing
Liquidity	Medium	Low	Reserve Management
Network	Low	Medium	Monitoring, Backup Plans

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