Our job is to consider the worst-case scenario, even the least likely. With this in mind, it's customary to understand that certain events can have a considerable impact on current exposure.
In the case of a DeFi protocol, if one of the cryptocurrencies were to lose all of its value, or massive withdrawals/deposits are made from one of the liquidity pools containing the cryptocurrencies, this would result in an increase in the proportion (and therefore exposure) of the cryptocurrency in question. The appearance of a valuation imbalance is in fact counterbalanced by the regulation mechanism present in the liquidity pools.
Also, in the case of a CeFi platform, we can't know the internal diversification of the various cryptocurrencies (these platforms don't communicate it), so we have to consider the possibility that all the funds placed on these platforms may be fully exposed to any of the cryptocurrencies present in the contract in question.
As a result, the maximum exposure that a token can possess corresponds to the sum of the proportions of the pools in which that token is located.
Consider the following diversification:
Pool name |
Pool type |
Tokens present |
Proportion |
POOL-A |
DeFi |
TKN1, TKN2 |
45 % |
POOL-B |
DeFi |
TKN3 |
35 % |
POOL-C |
CeFi |
TKN1, TKN3 |
20 % |
Maximum exposure is calculated as follows:
Token |
Maximum exposure |
Explanation |
TKN1 |
65 % |
45% POOL-A + 20% POOL-C |
TKN2 |
45 % |
45% POOL-A |
TKN3 |
55 % |
35% POOL-B + 20% POOL-C |