Risks

There are several risks involved in the Project Blizzard.

Standard: Custodian in Nature

First of all, Project Blizzard is only for Serenity Research existing and potential advisory clients, i.e. clients who engage us for portfolio advisory work or purchase dedicated research reports from us. Our service is purely advisory and we do not handle funds for clients. For instance, we will assist a client to set-up a multi-sig, or MPC or Ledger control, and work with the clients for executing transactions. For more details, please refer to our website.

However, to demonstrate the process, Project Blizzard uses an EOA address to handle all the funds. Currently, due to its size, its a Ledger controlled EOA with private key shards stored separately pursuant to our internal security guidelines. We will move to a MPC or multi-sig if the TVL of the demo fund reaches a certain size.

Therefore, the fund of Project Blizzard is in an EOA and custodian in nature. While the Manager will exercise due care in the handling and custody of assets, there is no guarantee that funds will be entirely safeguarded against potential loss or security breaches.

Standard: DeFi Investment Risks

Investing in cryptocurrency through decentralized finance (DeFi) platforms involves considerable risks due to the inherent nature of blockchain technology and decentralized protocols. DeFi investments rely heavily on smart contracts—self-executing agreements that, while efficient, are vulnerable to bugs, coding errors, and potential exploits by malicious actors. If such vulnerabilities are exploited, it can lead to significant financial losses with limited recourse. Additionally, DeFi platforms generally operate outside traditional regulatory frameworks, exposing investors to unique operational, governance, and counterparty risks without the consumer protections present in conventional financial markets. Liquidity risks are also a concern, as DeFi assets may experience sudden and severe price fluctuations, limiting the ability to quickly liquidate holdings at favorable values. Given these factors, DeFi investments should be approached with caution, as they are speculative and carry no guarantees of principal protection or expected returns.

Risks Pertaining to Project Blizzard

Blizzard is a USDC-denominated product that does not take on market volatility risk but assumes higher investment risk compared to other Serenity Research products. These risks include:

1. Exposure to multiple blockchains and centralized exchanges – Blizzard operates across multiple blockchains and centralized exchanges such as Binance and Hyperliquid.

2. Investment in relatively new stablecoins – Blizzard may invest in newer stablecoins, such as deUSD by Elixir or USR by Resolv. However, Blizzard will not invest beyond Tier 3 stablecoins as approved by Serenity Research.

3. Use of leverage – Blizzard employs leverage only in specific cases, including:

   • Funding rate arbitrage

   • Stablecoin investments with relatively low risk

4. Concentrated investment strategy – Blizzard does not diversify across many investments but focuses on established DeFi products with a track record and scale. It does not invest in new DeFi protocols or emerging blockchains, reducing hacking risks.