How will Altitude work at times of high volatility?

During periods of high volatility we expect to see a number of different effects in the market.

Increased liquidations

As the value of collateral decreases it is expected to see more user positions becoming undercollateralized. Similar to other lending protocols, Altitude has a process by which loans can be liquidated.

The liquidation threshold is configured per vault and can be found on app.altitude.fi. For avoidance of doubt: the lender's liquidation specs are not relevant for the user, as Altitude's smart contracts govern the liquidation process. The lender liquidation mechanism & threshold are only relevant for the vault as a whole.

These liquidations can be triggered by external liquidators, but in addition to this, Altitude is running this process itself as well.

Increased rebalancing

With frequent changes in prices, Altitudes’ rebalancing process will be triggered more frequently. Typically the rebalancing activity is triggered by bots that run on the Gelato network, it is anticipated that this will continue to work even in times of high volatility. As an extra safety mechanism, Altitude can trigger an urgent rebalance, this will overpay on gas to ensure the transaction is executed promptly. Triggers for this urgent rebalance are when Altitudes’ health factor:

• is out of bounds for n-blocks or more

• reaches a predefined minimum (our emergency minimum) With this mechanism Altitude has a safety net for high volatility but also any possible issues with the Gelato network.

Disabling Farming

In extreme cases where the market is so volatile that it is not possible to foresee how various farming strategies will perform, Altitude can also enter into a mode where the vault is no longer farming. To limit Altitudes’ exposure to farm losses, when operating in this mode, all funds from farming are withdrawn, and Altitude's loan is repaid. Disabling farming is triggered manually.