Ammalgam WETH Vault

The Ammalgam WETH Vault is an ETH-denominated strategy dedicated to providing reliable TVL to Ammalgam Pairs. It targets a 5% allocation to market-making liquidity, while the remaining capital is actively deployed across approved lending and ETH-yield opportunities. The vault targets approximately 100% ETH delta with a tolerance of ±2.5%, so its value is expected to move broadly with ETH while earning lending interest, staking yield, trading fees, and incentives.

Market making introduces negative-gamma, or impermanent-loss, risk: as the relative price of the two assets changes, the pool sells some of the appreciating asset and accumulates the depreciating asset. For an unlevered, full-range 50/50 constant-product position, a 30% price increase produces approximately 0.85% of loss relative to holding the same assets, while a 30% decrease produces approximately 1.57%. At a 5% vault allocation, the larger scenario represents approximately 0.08% of total vault value before fees. Fees and lending income may offset this loss but are not guaranteed to do so.

This market-making loss is incremental to the vault's intentional ETH exposure. A 30% decline in ETH could produce roughly a 30% decline in the vault, with the permitted delta tolerance allowing a somewhat larger or smaller result. The 0.08% estimate is therefore not a maximum total loss. Leveraged liquidity, liquidations, impaired collateral, depegs, unavailable liquidity, or smart-contract failures could also cause losses beyond this illustration.

The vault smart contracts are provided by Lagoon (https://lagoon.finance), and the keys authorizing movement of the vault's assets are managed through Utila (https://utila.io). The vault remains exposed to the risks of Lagoon, Utila, Ammalgam, and every external venue in which capital is deployed.