Risks
Market Volatility
Exxa Funds are exposed to the volatility of the cryptocurrency market. Despite using price smoothing techniques like Weighted Average Price (WAP), significant price swings in crypto assets can impact fund values.
Risk Mitigation: Price smoothing and slippage-adjusted pricing help, but market fluctuations can still cause changes in fund valuations.
Liquidity Risk
Funds containing less liquid assets may suffer from slippage, particularly during large trades or low-volume periods, affecting NAV and unit prices.
Risk Mitigation: Exxa uses slippage-adjusted pricing, but liquidity challenges remain, especially for newer or niche assets.
Smart Contract Vulnerabilities
Smart contracts automate fund management but could be susceptible to bugs or exploits, leading to security breaches or manipulation of pricing data.
Risk Mitigation: Audits and security protocols are in place, but inherent risks remain in smart contract-based systems.
Impermanent Loss
Funds with a mix of assets or liquidity provision could experience impermanent loss if asset prices diverge significantly.
Risk Mitigation: Crypto Funds are designed to minimize impermanent loss, but volatility in assets could still pose a risk.
Regulatory Risk
Changes in regulations around Defi or cryptocurrencies could impact Exxa’s operations or limit user participation.
Risk Mitigation: The Exxa Foundation monitors regulations, but uncertainty remains regarding future legal frameworks.
Overexposure to Large Assets
In Crypto Funds, market-cap weighting could lead to overexposure to a few large assets, reducing diversification.
Risk Mitigation: Diversifying across different fund types (e.g., equal-weighted funds) can help balance exposure.
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