⛑️Risks

Smart Contract Risks

While the strategy is designed to deliver stable, risk-adjusted returns, it carries inherent smart contract risks. The Jupiter and Drift protocols, which underpin Vectis strategies, have undergone rigorous development and employ robust security practices. However, vulnerabilities in smart contracts could still expose funds to unforeseen risks, such as exploits or bugs within the protocol's code.

Hedging Risks

Delta-neutral strategies are carefully managed to minimize exposure to price fluctuations. However, hedging risks may arise, particularly during periods of extreme market volatility. Rapid price shifts in assets like SOL, ETH, or BTC can impact hedging accuracy, potentially leading to unanticipated losses. Despite employing continuous monitoring and dynamic adjustments, managing a leveraged, delta-neutral strategy in volatile markets involves inherent complexities that users should be aware of.

Operational Risks

Operational risks are another area of concern. These could arise from delays or inaccuracies in fetching data, which may affect hedging operations and the overall performance of the strategy. Vectis mitigates these risks by sourcing data from multiple providers and using a time-weighted average price. However, operational challenges can persist, potentially impacting the vault's performance if adjustments are not executed optimally.

Liquidity Risks

Liquidity risks pertain to the availability of funds for withdrawals and the ability to efficiently execute trades, particularly during high-stress market conditions. In cases where underlying protocols face reduced liquidity, transaction delays or higher slippage may occur, impacting the performance of the strategy.

Market Risks

While the strategies aim to hedge price exposure, external market risks such as significant changes in funding rates or borrowing costs can influence yield generation. Prolonged unfavorable market conditions may reduce returns or increase costs, affecting overall profitability.

These risks, while managed through advanced monitoring and mitigation techniques, are inherent in the dynamic nature of DeFi strategies. Users should carefully evaluate their risk tolerance before investing.