Trading vault risks in edge cases

General
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1.The docs state that 50x leverage is possible. When we tested the leveraged basis trade, the maximum leverage was 26x. Is 50x possible achievable?

Let’s assume the following scenarios:

1.1 A short-lived 5% contango on World Markets ETH market that would get quickly arb’d away

1.2. Sustained 5% contango on Wold Markets and other DEX/CEX ETH markets for several minutes/hours

Let’s also assume all the counterparties of the vault are leveraged ETH basis trade enjoyoors with max leverage. How would the private vault depositors be affected in this case?

Will the leverage parameters differ for newly added assets?

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For clarity, the vault you’re describing in this case is the counterparty to the (bullish) levered basis traders. So, the vault:
A) Lends only or
B) Lends + is long perps on World and short on another venue like Hyperliquid to stay market neutral

  1. Yes, this is because of liquidity. The slider adapts to liquidity in the order book, so the leveraged is limited by how much you can practically borrow.

    1.1. Assuming this short lived contangio does not happen over a funding payment (which happens every 8 hours), there should be no effect on the vault for either scenarios A or B (above).

    1.2. I’ve described this here because it’s a longer answer: How can the counterparty to the (bullish) Levered Basis Trade lose money?

  2. Yes, every asset has 2 values which ultimately determine leverage: A) volatility parameter and B) liquidity parameter. These are necessarily assset specific

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