Risks

What are the risks of using the Blueberry Vaults?

While the Blueberry Vaults are designed to optimize rewards, they also come with inherent risks. These include smart contract risk, the risk of leveraged exposure to GLP in the GLP 3x Leveraged Vault, and the risk that the GLP collateral could fall below the USDC borrowed in the USDC Vault. Users are strongly advised to understand these risks and consider their own risk tolerance before using any of the vaults, as each of the three vaults carry different levels of risk.

GLP Non-Leveraged Vault

This vault carries the usual smart contract risks typically associated with DeFi, as well as specific risks that may arise from participating in the GMX ecosystem.

GLP 3x Leveraged Vault

The GLP 3x Leveraged Vault carries the additional risks of taking greater exposure to the price of GLP.

In terms of the leverage ratio, the GLP 3x Leveraged Vault targets 3x leverage, but the ratio can fluctuate with the price of GLP, the amount of rewards earned, and deposits and withdrawals from the GLP 3x Leveraged GLP vault or the USDC Vault. The GLP 3x Leveraged Vault's smart contracts allow the ratio to fluctuate until it hits 4x, at which point the Vault rebalances it immediately back to 3x.

USDC Vault

The USDC Vault is designed to protect the principal of USDC liquidity providers and should not have price exposure to GLP. Since the USDC Vault is integrated directly with the GLP 3x Leveraged Vault through smart contracts, there is no default risk where the borrower absconds with the borrowed funds. However, there is a risk that the combined GLP pool backing the USDC loan can become worth less than the USDC borrowed. In order to prevent this, the pools will automatically rebalance or deleverage by redeeming GLP for USDC and holding it in an excess USDC pool. This intends to effectively reduce the leverage and increase the collateral ratio, keeping the GLP collateral in good standing in relation to the borrowed USDC.

Because the combined pool of GLP assets is shared by both vaults, the GLP 3x Leveraged Vault's leverage ratio is directly related to the USDC Vault's collateral ratio.

In particular, the GLP 3x Leveraged GLP Vault targets 3x leverage which corresponds to a 150% collateral ratio. The corresponding rebalancing movements are described in the section above.

Summary

By understanding the economics of the Blueberry Vaults, users can make more informed decisions and optimize their own DeFi strategies. However, always remember to do your own research.