Risk Overview
Before using our yield strategies, it's important to understand the potential risks:
- Smart‑Contract Risk: Code vulnerabilities in any integrated protocol.
- Market Risk: Price swings that devalue collateral or vault tokens.
- Liquidation Risk: Leveraged legs can be forcibly closed if collateral falls.
- Stablecoin De‑Peg: Over‑collateralised stables may not redeem 1:1 in a bank run.
- Counterparty Risk: Failure of off‑chain or oracle services that feed data on‑chain.
- Operational Risk: Downtime in our rebalancing bots or governance failures.
Always size positions according to personal risk tolerance. Past performance ≠ future returns.
Enhanced Risk Disclosure
Below is a more granular view of the risks already listed, plus the specific ways Axal attempts to mitigate them. Use this to decide whether a given tier matches your personal risk budget.
| Risk Category | Description | Who/What is Exposed? | Mitigation at Axal |
|---|---|---|---|
| Smart‑Contract & Protocol Risk | Bugs or economic exploits in any integrated protocol (Aave, Morpho, Kamino, HyperEVM, Felix). | All tiers (severity rises with Aggressive). | ‑ Curated where protocol requires at least two independent audits per contract; |
| Third‑Party Integration Risk | Failures in routers, bridges, relayers, or any other external services our strategies tap into. | Primarily Balanced & Aggressive. | ‑ Prefer "battle‑tested" adapters;
|
| Counterparty & Custody Risk | Losses arising from another entity having control over user funds or recovery keys. | Minimal for all tiers (Axal is non‑custodial). | ‑ Privy self‑custodial wallets;
|
| Market & Liquidity Risk | Volatility or thin liquidity may drive collateral prices below safety thresholds, causing liquidations or impermanent loss. | Balanced & Aggressive (Conservative protected by blue‑chip and stables). | ‑ Auto‑Deleverage if LTV > 70%;
|
| Stablecoin De‑Peg Risk | Over‑collateralised stables (feUSD, USDXL) lose their dollar peg during a bank run. | Balanced. | ‑ Hard caps per stablecoin;
|
| Oracle/Data Risk | Bad price feeds can trigger false liquidations or erroneous rebalances. | All tiers. | ‑ Multiple oracle sources (Chainlink, Pyth, on‑chain TWAP) with medianisation. |
| Execution & Automation Risk | Downtime in our rebalancer or MEV front‑running can widen slippage. | Mostly Aggressive. | ‑ Redundant keeper network in three regions;
|
| Regulatory/Policy Risk | Changing rules around DeFi, leverage, or stablecoins could affect access or taxation. | All tiers. | ‑ Geofencing where legally required;
|
| Systemic / Chain Risk | L1/L2 outage, consensus failure, or cross‑chain bridge hack causes widespread contagion. | All tiers. | ‑ Diversified chain exposure;
|
Risk‑by‑Tier Heat Map
| Tier | Smart‑Contract | Counter‑party | Market/Price | Liquidation | Oracle | Systemic |
|---|---|---|---|---|---|---|
| Conservative | 🟢 Minimal | 🟢 Minimal | 🟢 Minimal | 🟢 Minimal | 🟢 Minimal | 🟢 Minimal |
| Balanced | 🟡 Medium | 🟢 Minimal | 🟡 Medium | 🟡 Medium | 🟡 Medium | 🟢 Minimal |
| Aggressive | 🔴 High | 🟢 Minimal | 🔴 High | 🔴 High | 🔴 High | 🟢 Minimal |
How You Can Mitigate Risk Personally
- Size sensibly: Never allocate funds you cannot afford to lose.
- Diversify tiers: Split capital across Conservative, Balanced, and Aggressive instead of going "all‑in" on one.
- Review session keys: Revoke or shorten session‑key duration if you won't be actively monitoring.
- Monitor dashboards: Enable push or email alerts for LTV and peg deviations (coming soon).
- Stay informed: Follow our Transparency Hub and Discord for audit reports, incident updates, and governance changes.