Comment on page
- LP liquidation risks
During extreme market volatilities and price swings, there can result in significant position liquidations on either side of longs and shorts. An imbalance between long and short positions leads to significant counterparty exposure for LP. Without active hedging, LP could sustain a loss from the exposure during volatile markets.
For trading pairs with DEX price feeds, there is incentive for arbitrageurs to attack the liquidity pool by frontrunning the price update when the reward outweighs the risk of the attack. Usually, when the liquidity pool on Qilin's marketplace is larger than the DEX liquidity pool, the incentive of attack increases. We recommend LPs to keep the liquidity pool on Qilin at a sub-incentive level to maintain a low level of LP exposure from arbitrageur attacks.