ATLAS - WCM's Risk Engine
The heart of WCM is its universal margin account, powered by ATLAS — a risk engine many years in the making. ATLAS allows you to maximize the productivity of everything you own across perps, spot, and lending.
Some useful features include:
Use any mix of yield bearing tokens and stablecoins as collateral.
Earn ETH on ETH, or BTC/BTC, returns. Use crypto as collateral to trade.
Make more money and take higher exposures as a market maker.
Combine lending and perps to get more leverage.
Capture market arbitrage in 1 click instead of looping.
The below description illustrates the behavior of the risk engine through examples followed by a conceptual explanation.
Trade Examples
1. Levered Basis Trade
Strategies allows you to execute this trade in 1 click.
The basis trade has been called, "the granddaddy trade" of crypto. Typically, a trader starts with USD, then uses 40% of the investment to buy a spot asset like BTC or ETH, another 40% to short perps of the same size and underlying asset, and the remaining 20% as margin for the perp position. The spot asset and the perp position are market neutral, meaning they offset each other so that the price movement of the asset will not introduce any risk to the trader's portfolio. In this example, if the perp is paying 10% to short, the return is 4%.
ATLAS understands this trade is market neutral and cannot be liquidated by ETH's price path. Here’s what ATLAS lets you do:
Given a balance of $100 USDT
Borrow $900 USDT in WCM’s lending market at 5.5% (Aave's borrow rate today).
Buy $1,000 of ETH spot.
Short $1,000 of ETH perps.
Under the same assumptions, the WCM trader is now a return of 50.50%. The macro-economics effects of this trade are described in The Capital Sink. Here are the returns of the basis trade on WCM compared to alternatives.
The dollar PnL is simply: (funding rate x perp size) - (borrow rate x borrow size).
WCM allows you to do this trade in 1 click, as described in The Bullish Leveraged Basis Trade.
2. Yield Bearing Multiplier
Stake-able assets such as ETH and SOL provide a return. Historically ~3% for ETH and 7.5% for SOL. Meanwhile, perps for these assets typically pay funding rates >10%. On WCM, you can use your staked assets as collateral for short perps, allowing you to safely earn a return on the staked asset and additionally on the perp.
Furthermore, you can borrow USDT in the lending market to use as leverage to buy staked assets and increase the notional of your short perp to earn more funding - multiplying your already enhanced returns.
3. Tax advantages
Selling your crypto may be a taxable event in most jurisdictions. What if you didn't have to sell?
Not financial advice.
4. ETH Maximalist & ETH Vaults
HODL! as they say.
Let's say you're a die-hard ETH bull (God bless you) or you run an ETH denominated yield strategy. You don’t want to sell ETH, so you deposit WETH on WCM. That ETH immediately works for you in three ways, simultaneously:
Perps: You can leverage long ETHUSD perps using your WETH as collateral.
Yield: At the same time, you can lend your WETH to earn yield.
Portfolio Leverage: Use that WETH as collateral to borrow USDT, applying portfolio leverage.
Spot Exposure: You never sold your ETH to open any positions, which may or may not be great for tax reasons - we wouldn't know, ask a tax professional.
In one move, you’re long ETH in three dimensions: spot, leveraged futures, and yield - and you can trade with that USDT you borrowed.
Consequently, ETH and BTC vaults on WCM organically generate higher returns than on any other exchange.
5. Auto-Earn
On WCM, lent capital contributes 98% of its value to your available margin.
If you have $100 USDT in your portfolio, then you have $100 of available margin to trade with.
If you lend out all $100 earning 8%, you are now earning an additional 8% returns on top of your normal trading activity, because you have $98 of available margin to trade.
Risk Concepts
Visit the Stats page on WCM to see the relevant risk metrics described in this section.
Asset Volatility
Assets which are more volatile are assigned higher risk scores and consume more margin. This protects users from being exposed to counterparties with too much risk.
Net Market Exposure
ATLAS understands your net market exposures. For example, if you hold an ETH spot balance, and want to short ETH perps in equal size, the market risk of those positions nets to 0. In other words, that position cannot be liquidated based on the price path of ETH. ATLAS allows you to borrow large amounts of capital to maintain this position, because it understands your risk more holistically.
Perps, Spot, and Lending
WCM has perps, spot, and lending markets fully integrated into 1 trading venue. This integration is necessary for WCM to deterministically and accurately evaluate risk. Every "value" computation is trade-able on the venue. WCM prevents griefing and manipulation by using different value computations for different contexts. In general, WCM computes value based on post-execution quantities.
Post-Execution Costs
When entering a trade, ATLAS looks at the post-execution cost of the trade. Post-execution costs means it factors in costs of execution, including "slippage" from market depth and exchange fees. This nuance is necessary to mitigate counterparty risk. WCM has implemented safe-guards to prevent griefing this calculation.
Calculation Details
Spot assets are valued based on the post execution cost for USDT.
Lender-side loans contribute 98% of the notional value of the loan to the available margin.
Every asset has a risk-specific parameters associated with it, set by WCM, and displayed transparently on the More > Exchange Stats page.
The risk engine values every position under the scenario where the market moves against it, based on its risk coefficient.
Unrealized PnL automatically contributes fully to available margin.
The equations are detailed in Risk Based Portfolio Valuation.
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