Risk Disclosure

1. Market Volatility & Liquidity Risk

• Extreme price swings: Crypto markets are highly volatile and can move rapidly, including “gap” moves.
• Liquidity variability: Order books can thin unexpectedly. Large orders may move the market or not fill.
• Bid–ask spreads: Spreads may widen suddenly, increasing transaction costs and slippage.
• Market discontinuities: Events, outages, or liquidations can cause abrupt price changes or trading halts.

2. Execution, Slippage & Order Handling Risk

• Latency & queueing: Network delays, exchange throttling, and matching engine load can delay or prevent execution.
• Slippage: Market orders and stop orders may fill at worse prices than expected due to rapid price movement.
• Partial fills & rejections: Orders may partially fill, be cancelled, expire, or be rejected by the exchange.
• Duplicate or missed orders: Retries and idempotency issues may cause duplicates or misses during incidents.
• Order type behavior: Stop, stop-limit, post-only, IOC/FOK, OCO, and advanced types behave differently per exchange.

3. Leverage, Margin & Derivatives Risk

• Amplified losses: Leverage can magnify both gains and losses; small moves can liquidate positions.
• Liquidation mechanics: Funding rates, maintenance margin, and auto-deleveraging vary by venue.
• Basis & funding risk: Futures/perpetuals may deviate from spot; funding payments can be material.
• Options complexity: Greeks, implied volatility, and assignment/expiry risks can be significant.

4. Exchange, Counterparty & Custody Risk

• Operational failure: Exchanges or custodians may suffer hacks, insolvency, or loss of access to assets.
• Account-level restrictions: KYC/AML reviews, geoblocks, or API permission changes may limit trading.
• Withdrawal limitations: Platforms may restrict withdrawals or impose delays during stress events.
• Counterparty exposure: You bear risk to any third parties you engage, including prime brokers or lenders.

LiquidityAI does not custody your assets; trading occurs through the exchange accounts you connect and control.

5. Stablecoin, Protocol & Smart Contract Risk

• Depegging: Stablecoins can lose their peg due to market, collateral, or governance failures.
• Smart contract bugs: Protocol code may contain vulnerabilities; audits do not guarantee safety.
• Governance attacks: Token voting, oracle manipulation, or admin-key risk may impact protocols.
• Bridge risk: Cross-chain bridges are frequent targets of exploits and can fail catastrophically.

6. Network, Blockchain & Fork Risk

• Congestion & fees: Network congestion can raise fees and delay or fail on-chain transactions.
• Reorgs & forks: Chain reorganizations or protocol forks may disrupt pricing and exchange operations.
• Validator/miner behavior: Censorship, downtime, or cartelization risks exist on some networks.

7. Regulatory, Policy & Tax Risk

• Evolving rules: Laws and enforcement priorities change; assets may be deemed securities or otherwise restricted.
• Jurisdictional limits: Access or features may be disabled to comply with sanctions, licensing, or local rules.
• Tax uncertainty: Tax treatment of digital assets varies; you are responsible for filings, records, and payments.

8. Data, Price Feeds & Information Risk

• Inaccurate data: Market data may be delayed, incomplete, or incorrect; third-party APIs can fail or change.
• Oracle & index risk: External oracles or indices used in strategies may be manipulated or disrupted.
• Backfill differences: Historical data sources may differ from live feeds, impacting backtests vs. live results.

9. Technology, API & Operational Risk

• Service disruptions: Internet, cloud provider, DNS, or data-center incidents may interrupt services.
• API changes: Exchanges may modify endpoints, permissions, rate limits, or behaviors without notice.
• Security incidents: Credential theft, phishing, or malware can compromise accounts and keys.
• Software defects: Bugs can cause unexpected behavior; no system is error-free or perfectly secure.

10. Model, Strategy & Backtesting Risk

• Overfitting: Models tuned to historical data may perform poorly in forward markets.
• Regime change: Markets evolve; correlations, spreads, and liquidity can shift suddenly.
• Hypothetical performance: Backtests and paper trading are illustrative; they omit frictions and path dependencies.
• Parameter sensitivity: Small changes to inputs can cause large changes to outcomes.

11. Automation, Configuration & Human Error Risk

• Misconfiguration: Position sizing, leverage, or symbol errors may produce unintended exposures.
• Unintended triggers: Incorrect rules, duplicated signals, or stale webhooks can cause unwanted orders.
• Monitoring: Automated systems require monitoring; you are responsible for oversight and intervention.

12. Force Majeure & Extraordinary Event Risk

Natural disasters, wars, cyberattacks, pandemics, government actions, or other extraordinary events can disrupt markets and infrastructure. Such events may lead to outages, data loss, or inability to execute, modify, or cancel orders.

13. Risk Controls & Best Practices (Non-Exhaustive)

• API security: Use trade-only keys where supported, enable IP whitelisting, rotate keys regularly, and never share credentials.
• Account security: Enable 2FA, use strong unique passwords, secure devices, and keep software updated.
• Position sizing: Limit per-trade and per-asset exposure; consider daily loss caps and max drawdown limits.
• Stops & exits: Use stop-loss/take-profit, time-based exits, and circuit breakers where appropriate.
• Diversification: Avoid concentrated exposures; understand correlations during stress.
• Paper trading first: Test new strategies and changes on paper before going live.
• Monitoring & alerts: Set alerts and routinely review logs, fills, and P&L; have manual overrides ready.
• Documentation: Keep a change log of strategy modifications, versions, and configuration history.
• Regulatory & tax: Track transactions and consult qualified professionals on your obligations.

These practices do not eliminate risk and are provided for general informational purposes only.

14. Suitability & No Advice

Digital asset trading is not suitable for everyone. The risk of loss can be substantial. Our Services do not constitute investment, legal, tax, or accounting advice and do not make recommendations about the suitability of any strategy, asset, order, or venue. You are solely responsible for evaluating whether to use our tools and how to configure and deploy strategies.

You acknowledge and agree that your use of LiquidityAI does not create any fiduciary relationship. You remain fully and solely responsible for all decisions and outcomes.

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