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Risks

Trading on leverage carries significant risk. You can lose all your funds.

1) Liquidation risk (primary)​

Liquidations happen at the underlying money market level (Blend). Your position can be liquidated due to:

  • adverse price movement
  • collateral/debt value shifts
  • changes in borrow/supply rates that degrade position safety over time

2) Oracle / reference pricing risk​

Money markets typically rely on oracle/reference pricing for risk checks and liquidations. Oracle prices can deviate from spot prices, which can:

  • liquidate positions earlier than expected
  • create confusing PnL vs “market price” differences

3) Spot execution risk (slippage / price impact)​

Opening/closing requires a swap on Aquarius:

  • thin liquidity can increase slippage and price impact
  • multi-hop routes can change between quote time and execution time
  • min-output protections help but can cause a transaction to revert if too tight

4) Interest rate / utilisation risk​

Borrow and supply rates can change quickly with utilisation. This can:

  • increase carry costs
  • reduce funding (or flip it negative)
  • accelerate liquidation risk

5) Smart contract risk​

Untangled Loop is stateless. It acts as a strategy execution router so is exposed to minimal smart contract risk. However, users are still exposed to:

  • Blend pool and token contracts
  • Aquarius router and pools Bugs, edge cases, or unforeseen interactions could lead to loss.

6) Systemic liquidity risk​

In stressed market conditions:

  • spot liquidity can disappear
  • money markets can reprice sharply
  • liquidation cascades can occur