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Scenario Analysis

How does Stabolut perform in extreme market conditions?

Scenario 1: ETH Crashes 50% in 1 Hour​

  • Collateral Value: Drops 50%.
  • Short Position Value: Gains 50% (approx).
  • Net Effect: Portfolio value is stable in USD terms.
  • Risk: Exchange liquidation if margin is not managed. Stabolut uses automated bots to rebalance collateral between spot and futures accounts instantly.

Scenario 2: Funding Rate is Negative for 30 Days​

  • Impact: Protocol pays funding fees.
  • Mitigation:
    1. Yield from LSTs offsets some cost.
    2. Insurance Fund covers the remaining deficit.
    3. If Insurance Fund is depleted, SBL may be sold/minted to recapitalize (Backstop).

Scenario 3: Exchange Insolvency (e.g., FTX)​

  • Risk: Loss of funds on CEX.
  • Mitigation: Diversification across multiple CEXs (Binance, Bybit, OKX) and on-chain DEXs to limit single-point-of-failure exposure. Off-exchange settlement (Copper Clearloop) is used where possible to minimize exchange custody risk.