Risks

mBASIS Risks

Investing in mBASIS involves certain risks, and it’s important for investors to fully understand these before engaging. While Midas employs robust risk management strategies, the following key risks should be considered:

Counterparty Risk

Although mBASIS tokens are non-custodial and permissionless, the collateral used in the basis trading strategy may be held on centralized exchanges. This introduces counterparty risk, as the solvency and security of those exchanges are critical to the safety of the assets. Midas takes steps to mitigate this by working with premium exchanges, but custodial failures, such as hacks or insolvency, could still result in losses.

mBASIS relies on multiple counterparties, each introducing its own set of risks:

• Custodians: Assets may be held with third-party custodians, and their insolvency, mismanagement, or security breaches could result in asset loss.

• Stablecoin Issuers: The strategy utilizes stablecoins, which depend on the solvency and proper functioning of the issuing entities. Any regulatory actions or operational failures at stablecoin issuers could affect mBASIS liquidity and redemption.

Funding Risk

mBASIS relies on the basis trading strategy, which typically earns revenue from positive funding rates in futures markets. However, during certain market conditions, negative funding rates may arise, requiring mBASIS to pay rather than receive funding.

Liquidation Risk

In volatile markets, there’s a risk of positions being liquidated if the value of collateral falls below certain thresholds. For mBASIS, this may occur if market conditions move sharply against the basis trading positions.

Execution Risk

When trading cryptocurrencies, the mBASIS strategy may face execution risks due to market volatility and liquidity shortages. Large trades can create price slippage, meaning the executed price may differ from the expected one, negatively impacting the portfolio's value. High volatility can further exacerbate these risks, leading to adverse effects on returns.

Other Considerations

Additional risks include market volatility, regulatory changes, and operational risks associated with smart contracts and DeFi protocols.

You can learn more about the risks of mBASIS by reading Legal Documents.