Liquidity Providing Strategy – Full Strategy Description

LP Strategy is a configurable strategy built around the asset you allocate (the "Strategy Asset"). It may use one or more of three independent components: supplying the Strategy Asset to selected lending protocols; looping — depositing the Strategy Asset, or an approved wrapped or yield-bearing representation of it, as collateral, borrowing against it and redeploying the borrowed assets to create additional yield exposure; and delta-neutral interest-rate arbitrage on Binance. The specific component or combination of components depends on the configuration of the relevant strategy, available rates, market liquidity, and applicable risk limits; a specific LP strategy may use only one component, several components, or change the active component over time, and the components are not required to operate simultaneously.

Where active positions create directional market exposure, offsetting positions with equivalent delta exposure are designed to maintain the strategy's delta-neutral structure.

How to read this document. Sections 2 and 3 describe how the strategy works and what you receive. They state design and intent, not outcome. Section 4 sets out what can go wrong, and the qualifications to sections 2 and 3 are stated there; it is not an exhaustive list of the circumstances in which a loss may arise. This document is information about a product. It is not investment advice and not a recommendation to deposit; take independent advice if you are unsure.

2.1 Lending markets. Where lending markets are used, the Strategy Asset may be supplied to selected lending protocols to generate interest paid by borrowers and, where applicable, protocol incentives. Lending rates are variable and depend on borrowing demand, market utilisation, available liquidity, and the terms of the relevant protocol.

2.2 Looping. Where looping is used, the Strategy Asset, or an approved wrapped or yield-bearing representation of the Strategy Asset, may be deposited as collateral. The strategy may borrow against the deposited collateral and redeploy the borrowed assets to create additional yield exposure. This process may be repeated within predefined collateral, leverage and risk limits. Looping may increase potential returns.

2.3 Interest-rate arbitrage on Binance. Where interest-rate arbitrage on Binance is used, the Strategy Asset is used as collateral in a delta-neutral arbitrage position, built as a cash-and-carry (spot–futures) trade.

Collateral and margin. The Strategy Asset is deposited with the exchange as collateral. For margin purposes, the exchange does not value collateral at its market price: it applies a discount (a "haircut") that it sets itself. The discount is larger for volatile and non-major assets, and the exchange may change it unilaterally and without notice. Available margin is the discounted value of the collateral, and the exchange calculates margin requirements and liquidation levels on this discounted basis under its own methodology.

Borrowing and leverage. A stablecoin loan is drawn against the discounted collateral value. The component uses borrowed funds; effective leverage varies with the value of the positions and with the discounted value of the collateral recognised by the exchange.

The position. Borrowed stablecoins are used to purchase an asset (for example, ETH or SOL); the purchased asset is staked to earn staking yield; and a short position of equivalent delta is opened against it on the exchange's derivatives market. The positions are matched by delta exposure: the component is designed so that the amount of directional exposure purchased is offset by an equivalent amount of directional exposure sold. As a result, it does not seek to generate returns from an increase or decrease in the price of the underlying asset. This component seeks to earn returns primarily from the perpetual-futures funding rate and the staking yield on the asset, net of borrowing costs. Position size is limited to a share of open interest in the traded pair on the exchange.

Delta matching applies to the traded asset. The deposited Strategy Asset is not part of the traded position: it serves as loan collateral throughout.

Leverage management. For the matched long and short positions, the pair is designed so that a move in the price of the traded asset increases margin requirements on one side while releasing margin on the other. Effective leverage rises when the discounted value of the collateral falls relative to the loan — whether because the collateral's market price falls, or because the exchange increases the discount it applies when valuing the collateral. As effective leverage approaches predefined thresholds, the company's automated deleveraging process seeks to reduce positions and lower leverage.

2.4 Position management and reallocation. Only the components that are active under the configuration of the relevant LP strategy are used and monitored. Active positions may be adjusted or rebalanced as interest rates, funding rates, asset prices, liquidity, collateral requirements, borrowing conditions, and market conditions change. Where permitted by the relevant strategy configuration, capital may be reallocated from one eligible component to another; this does not mean that all available components must be used at the same time.

3.1 Your result. Participant results are calculated in the Strategy Asset; rewards are calculated and accrued daily. A result may be positive or negative.

3.2 Costs the strategy bears. Trading, borrowing, funding and execution costs. These reduce the strategy's result before anything is attributed to participants.

3.3 Fees and conditions. The fees, minimum amounts and withdrawal terms applicable to this strategy are set out in the strategy's conditions in the platform, and prevail over any figure repeated elsewhere.

3.4 Taxes. Any taxes arising from your participation are your responsibility, in accordance with the jurisdiction in which the company operates and your own. The company does not provide tax advice and does not determine your tax position.

Participation in the strategy involves risk. A participant may lose part or all of the funds allocated to the strategy. The relevance of each risk depends on the components actually used by the specific LP strategy. Descriptions of monitoring, limits and controls in this document describe how the strategy is designed to operate, not a promise that it will.

4.1 Lending market risk. Where lending markets are used, lending rates may decrease as borrowing demand and market utilisation change. Lending protocols may also experience bad debt, insufficient liquidity, withdrawal restrictions, or losses associated with borrower liquidations.

4.2 Protocol and smart contract risk. Where on-chain protocols or smart contracts are used, vulnerabilities, coding errors, configuration mistakes, governance risks, oracle failures, or malicious attacks may result in a partial or complete loss of funds.

4.3 Looping and leverage risk. Where looping is used, repeated borrowing and redeployment of assets may increase leverage. This may amplify borrowing costs, losses, collateral sensitivity, and liquidation risk.

4.4 Collateral and liquidation risk. A decline in collateral value, an increase in borrowing rates, or a change in collateral or margin requirements may require additional collateral or result in the partial or full liquidation of a position. In the Binance arbitrage component, the deposited Strategy Asset is not covered by the component's offsetting positions: a decline in its market price, or an increase in the discount applied by the exchange when valuing it, reduces the collateral value recognised by the exchange and increases effective leverage even while the long and short positions remain matched. This applies in particular where a volatile asset (for example, BTC or ETH) is used as collateral. Where liquidation occurs, collateral may be sold in part or in full to repay borrowing, and a participant may receive back fewer units of the Strategy Asset than were allocated.

Mitigation: the company's automated deleveraging process seeks to reduce positions as effective leverage approaches predefined thresholds; it operates on the company's own model of the exchange's margin requirements, while the exchange calculates margin and liquidation under its own methodology, and it does not prevent liquidation.

4.5 Wrapped and yield-bearing asset risk. Where wrapped or yield-bearing representations of the Strategy Asset are used, they may trade below the value of the underlying asset, lose their intended peg, become difficult to redeem, or be affected by smart contract, custodian, issuer, validator, protocol, or liquidity risks.

4.6 Interest-rate, funding-rate, and incentive risk. Lending rates, borrowing costs, interest-rate differentials, funding rates, and protocol incentives may decrease, disappear, reverse, or become negative after applicable transaction and execution costs. In the Binance arbitrage component, the perpetual-futures funding rate may decrease, turn negative, or remain negative for an extended period, which reduces the return of that component or makes it negative for that period.

4.7 Hedging and execution risk. The strategy uses offsetting positions with equivalent delta exposure that are designed to maintain a delta-neutral structure. However, partial order execution, delays between transactions, insufficient liquidity, slippage, price differences between instruments, technical failures, or the liquidation of one position may temporarily disrupt the hedge and create residual directional exposure.

4.8 Exchange risk. Where Binance is used, the strategy is exposed to operational, cybersecurity, liquidity, custody, withdrawal, regulatory, and counterparty risks associated with the exchange.

4.9 Oracle risk. Where a protocol depends on oracle data, incorrect, delayed, manipulated, or unavailable data may cause incorrect asset valuations, failed transactions, improper liquidations, or other losses.

4.10 Blockchain and network risk. Where on-chain components are used, network congestion, blockchain failures, validator problems, governance decisions, increased transaction fees, or changes to protocol parameters may affect access to funds or strategy execution.

4.11 Liquidity risk. Limited liquidity, withdrawal restrictions, price slippage, delayed transactions, or unsuccessful rebalancing may negatively affect strategy performance.

4.12 These conditions arrive together. The risks above are not independent, and the conditions in which each is most likely are the same conditions. In a sharp market-wide fall, the Strategy Asset posted as collateral in the arbitrage component falls in price; the exchange may raise the discount it applies to volatile collateral in response to the same volatility; the funding rate may turn negative; borrowing costs may rise; liquidity thins, so reducing positions costs more; and lending protocols may face withdrawal restrictions in the same period. Each of those raises effective leverage or reduces available margin, and they can arrive at once. The automated deleveraging process then has to reduce positions in precisely the conditions in which reduction is most expensive, acting on the company's model of exchange requirements the exchange may be changing at the same time. A loss in such a period can be larger than the sum of the risks taken separately.

4.13 Other risks, and past performance. The value and performance of the strategy may be affected by market, political, economic, credit, regulatory, operational, technological, and other conditions. Past performance is not a guarantee of future results.

5.1 Changes. The company may change the parameters of the strategy. Activation, deactivation and reallocation between the components described in section 2 occur within the strategy's configuration as described in 2.4. The exchange, for its part, values collateral at a discount it sets and may change unilaterally and without notice, and calculates margin requirements and liquidation under its own methodology; lending protocols may change their terms under their own rules. The strategy's current conditions are shown in the platform.

5.2 Status of this description. This description explains how the strategy operates. Your relationship with the company is governed by the User Agreement and the documents it incorporates, including the strategy's conditions in the platform; where this description differs from them, they prevail, and nothing here extends the company's obligations. It is a summary: it does not describe every feature of the strategy or every circumstance in which a loss may arise. Statements about how the strategy is designed to operate, how markets, protocols or venues behave and how third parties may act are the company's present understanding, not representations or warranties. Words such as "seeks", "intended" and "designed" describe objectives, not outcomes.

The strategy may use borrowed funds and operates on cryptocurrency exchanges and on-chain protocols, where positions can be liquidated. Deposit only an amount you could lose without it affecting your circumstances.

5.3 Definitions.
​Strategy Asset — the asset a participant allocates to the strategy.
​Component — one of the independent approaches the strategy may use: lending markets, looping, or interest-rate arbitrage on Binance.
​Lending protocol — an on-chain protocol through which supplied assets are lent to borrowers in exchange for interest.
​Utilisation — the share of assets supplied to a lending market that is currently borrowed.
​Protocol incentives — rewards a protocol distributes to users who supply assets. Bad debt — borrowing on a lending protocol that is not repaid and is not fully covered by the borrower's collateral.
​Looping — repeatedly depositing collateral, borrowing against it, and redeploying the borrowed assets.
​Wrapped / yield-bearing representation — a token that stands in for another asset; a yield-bearing one is designed to accrue yield to its holder.
​Peg — the intended fixed relationship between a representation and its underlying asset.
​Collateral — assets pledged to secure borrowing.
​Stablecoin — a crypto asset designed to track the value of a fiat currency.
​Discount (haircut) — the reduction the exchange applies to the market value of an asset when counting it as collateral.
​Margin — the collateral value the exchange recognises as available to support open positions.
​Effective leverage — the ratio of total position value to the discounted collateral value recognised by the exchange.
​Delta — the sensitivity of a position's value to a change in the price of the underlying asset; two positions are "matched by delta" when that sensitivity is equal and opposite.
​Perpetual futures — derivative contracts without an expiry date, traded on the exchange's derivatives market.
​Funding rate — a payment periodically exchanged between holders of long and short positions in a perpetual futures contract.
​Cash-and-carry — a purchased asset combined with an offsetting derivative short position in the same asset.
​Staking — committing an asset to support the operation of its blockchain network in exchange for rewards.
​Oracle — an external data feed on which an on-chain protocol relies.
​Open interest — the total outstanding amount of derivative contracts in a given trading pair.
​Liquidation — the forced reduction or closing of positions and/or sale of collateral by an exchange or protocol under its own methodology when its collateral or margin requirements are not met.
​Slippage — execution of an order at a worse price than expected at the time it was placed.