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Risks
Underlying market risk
A token follows its markets. If they move against the view the token is built on, it loses value. A market's price can also differ from the asset's own price, because some markets trade around the clock while the real asset doesn't.
Leverage risk
Leverage amplifies losses as well as gains. Short products lose value when their market rises.
Volatility and path dependence
Hyper, Giga, and Short products rebalance whenever their exposure leaves its band, which makes the result depend on the path the market takes. A trending market helps. A move in the product's direction can beat the straight multiple, and a move against it can lose less. A choppy or sideways market erodes value, and the token can lose money even when the market ends flat.
Funding is also paid or received on the full exposure. When it runs against the position, Hyper pays three times and Giga five times what spot exposure would, and that adds up over time.
Funding risk
Holding exposure means paying or receiving funding continuously, at a rate that changes with market conditions. It's built into the token's value and can work for you or against you. A product with several legs has funding on each of them, and it adds up.
Execution and slippage risk
Mints and redemptions trade on the underlying markets. When those markets are thin or moving fast, getting in or out costs more, and a trade can fail if it can't fill within its price bound.
Rebalance risk
Rebalancing trades at market prices, and all holders share the cost. On a thin market a rebalance may take several steps, and the product sits away from its target in the meantime.
Basket constituent risk
A basket carries the risk of every market in it. Between mints and redemptions its weights drift with relative performance, so at any given moment the basket may not be equally weighted.
FLIPS and multi-leg risk
A FLIPS product holds a long leg and a short leg, and you can lose on both at once, for example if the market you're long falls while the market you're short rises. Both legs share one margin account, so a large move on either one affects the whole product. Gross exposure is higher than net exposure.
Gap and liquidation risk
A sudden move or a thin market can drop a token sharply. The positions sit on a venue that can liquidate an account whose margin runs out. Rebalancing is designed to act before that happens, but there's no guarantee it will, and in an extreme move a product can lose most or all of its value.
Price and oracle risk
Products are valued at each market's mark price from the venue. If a mark were wrong or manipulated, the product would be misvalued. When a price goes stale or a market halts, mints and redemptions stop until it recovers.
Liquidity risk
The tokens have no dedicated secondary market today. To get in or out you mint or redeem, and both depend on liquidity in the underlying markets and on the product's size limits.
Admin and access risk
An admin can set a product to reduce-only, which stops mints, or to disabled, which stops mints and redemptions. The admin can also change a product's fees and limits.
Program and venue risk
PerpTokens runs as onchain program code, and that program is upgradeable. A bug, an exploit, or a harmful upgrade could cause a loss of funds. Products also depend on the underlying venue's code and solvency.