Risk Assessment

Our risk assessment leverages the best industry practices and continually upgrades its methodology through intensive research of protocol metrics. By incorporating the latest developments in risk methodologies specific to restaking protocols, we ensure robust and reliable risk management.

Key Elements of Our Risk Assessment:

1. Industry Best Practices: We adopt and integrate cutting-edge risk management techniques from leading industry standards.

2. Continuous Improvement: Our methodology evolves with ongoing research and analysis of protocol metrics, ensuring we stay ahead of emerging risks.

3. Advanced Metrics Analysis: We use comprehensive data analytics to monitor transaction patterns, smart contract states, and market sentiment, providing a deep understanding of potential risks.

4. Specialized Focus on Restaking Protocols: Our risk assessment framework specifically targets the unique aspects of restaking protocols, incorporating the latest advancements and methodologies in this area.

   LRT vault variations

   Points vault

   • Maximize point farming

   • Use combinantion of Pendle, Gearbox, Morpho, Mellow, Symbiotic

   • Strategy is delta neutral

   Yield vault

   • Maximize yield, point are secondary

   • Use combination of Pendle, Balancer, Aura, Uniswap, Curve, Pancakeswap

   • Strategy is delta neutral

   Depeg vault

   • Maximize yield while mainting minimum 1x points

   • Use combination of Pendle, Balancer, Aura, Uniswap, Curve, Pancakeswap

   • Strategy is delta neutral; directional when depeg profiting

     Charting Depeg Performance

     The accompanying charts display the differences between LRT market prices (on decentralized exchanges) and their actual ETH value. These visualizations show how periodic deviations can be exploited for strategic rebalancing.

     By leveraging these temporary price deviations, you can optimize your portfolio, maximize returns by an additional 14.7% APR, and maintain stable income streams from staking pools. Experience the benefits of informed, strategic DeFi investing with LevelQ.

As we anticipate the emergence of more Liquid Restaking Tokens (LRTs) in the near future, the importance of robust LRT risk assessment cannot be overstated. The growing diversity and volume of LRTs will likely lead to increased liquidity fragmentation among different LRT tokens, presenting both greater risks and opportunities. This fragmentation can result in more frequent depegs, offering additional sources of income through strategic portfolio rebalancing. Effective risk assessment frameworks will be crucial in navigating this complex landscape, allowing investors to capitalize on these opportunities while managing the associated risks prudently.

Peg Support Mechanics

Stabilize Your Investments

For each LRT token, LevelQ vaults define zones to support the peg by swapping WETH for LRT if the price drops below a DAO-determined support level. This approach allows you to purchase LRT at a discount.

• If LRT redemptions are unavailable, vaults will gradually liquidate their holdings once the price reaches the ‘rebalancing zone.’

• If ETH can be withdrawn from a liquid restaking protocol, vaults will redeem ETH by selling LRT.

Backtests

To illustrate the effectiveness of our peg support mechanics, we conducted a backtest on the weETH/ezETH pair. The strategy aims to buy LRT when its price is below the average price during the period and sell when the price exceeds the average.

The performance of this strategy (represented by the green line) outperformed the Buy and Hold (B&H) strategy, even accounting for trading fees.

The chart below show the price deviation of the two token versus ETH, highlighting the trigger points for rebalancing.

The more LRTs will be included in the vaults the more volatility strategy will be able to harvest.