Farmer Risks

Price impact when opening / closing a position

Risk: Similar to Margin Trading, if you try to open a large position relative to the pool size and require swapping, you transaction could incur a large price impact.

Mitigation:

Open multiple smaller positions or open a smaller position and add collateral to that position at a later time. You should wait for a short interval for arbitrageur to bring price back to normal.

Bring a combination of asset that require lower swapping requirement-e.g., if you want to open a 2x leverage on BUSD-BNB pair. Supplying only BNB token will result in a very small swap amount because the Vault will loan to you approximately equal value in BUSD.

Avoid opening and exiting position in a short period of time. When exiting a large position, choose "Minimize Trading" strategy to reduce price impact from swapping asset and trading fees.

Impermanent Loss:

Risk: Risk of (impermanent) capital loss from asset rebalancing in the Automated Market Maker ("AMM") pool. Stable coins pairs farming are also subjected to impermanent loss. Just like any other coins, the price of stable tokens are dictated by supply and demand, which some time can cause the price to be off-pegged. While this value is generally small and transient, we have seen instances where stable coins stay off-pegged for an extend period of time. By opening a position with a large leverage, you are also amplifying the impermanent loss on your principal. Mitigation: Impermanent loss is not unique to ATE Finance. It is common among all yield farming and AMMs. While we currently do not yet have a way to mitigate it, users can choose to yield farm asset pairs that have high correlations to minimize potential impermanent loss. For more information on this concept, you can start with this article.

Negative APY:

Risk: This is a case when borrowing rate is higher than your yield farming gain. This means your debt position will grow faster than your equity value. If this continues for a period of time, it could even reduce your equity value down to the level that triggers liquidation. Likely causes for this case to occur are: A) High borrowing pool utilization, pushing up the borrowing interest rate. B) A significant price drop in the rewards token (eg. CAKE token) causing the farming yield to drop. Mitigation: Monitor your positions closely and have a plan if APY turns negative - i.e., close position, wait and see, or add collateral to the position. If utilization remains high for a period longer than a few days, the team will analyze the situation and likely raise the borrowing interest rate which should lower utilization. Please be careful when opening a position if the pool's utilization is high.

Liquidation Risk

Risk: If you open a margin trading position, ATE Finance Vault will lend you a certain amount of funds. You will take the risk of being liquidated when the Debt Ratio (debt value/ position value) reaches the Liquidation threshold. See Pool-Specific Parameters for more information here. Mitigation: This can be mitigated by using a lower leverage level, monitoring positions during volatile market conditions, and closing them before hitting the liquidation threshold.