Price Deviation Risks

Price deviation risks occur when the price of an asset on a specific protocol diverges significantly from the global market price. This can be caused by low liquidity, oracle errors, or technical glitches in the protocol.

For derivatives traders, this is a major risk because it can lead to unfair liquidations or the inability to exit positions at a fair price. Protocols must implement circuit breakers and robust price feed monitoring to detect and mitigate these deviations.

Understanding these risks is crucial for anyone participating in decentralized derivatives markets, as they are a primary source of unexpected financial loss.