Market Risk Notice

Abra Digital Market Risk Notice
Last updated: June 11, 2025

This Market Risk Notice (“Notice”) describes the material market-related risks inherent in engaging Abra Digital’s over-the-counter (“OTC”) services, particularly stablecoin conversions, cryptocurrency arbitrage, and liquidity management. It is intended to help institutional professional counterparties understand the dynamics that may affect trade execution, pricing, and the value of assets. By transacting with Abra Digital (“we,” “us,” or “our”), you acknowledge that you have reviewed and understood the following risks.

1. Price Volatility Risk

1.1. Stablecoin De-Pegging

• Nature of Risk: Although USDT and USDC are designed to trade at $1, regulatory actions, reserve shortfalls, or market panics can cause them to trade above or below parity.
• Potential Impact: Temporary de-pegging may lead to realized losses if you convert at unfavorable exchange rates; wide bid-ask spreads may persist until confidence is restored.

1.2. Cryptocurrency Volatility

• Nature of Risk: Major cryptocurrencies (e.g., BTC, ETH, SOL) routinely exhibit intraday price swings of 5–15% or more.
• Potential Impact: Liquidation value of holdings or collateral may shift rapidly, affecting margin requirements and execution quality for arbitrage or liquidity-provision trades.

2. Liquidity Risk

2.1. Depth of OTC Markets

• Nature of Risk: While Abra Digital maintains deep pools, market stress or regional banking holidays can thin liquidity on specific fiat-stablecoin corridors.
• Potential Impact: Large orders may consume multiple liquidity sources, resulting in slippage, execution delays, or partial fills.

2.2. Concentration Risk

• Nature of Risk: Heavy reliance on particular corridors (e.g., USD↔USDT in MENA or EUR↔USDC in CEE) can create single-point liquidity bottlenecks.
• Potential Impact: Regional events—such as capital controls, currency devaluations, or local regulatory actions—may abruptly constrain liquidity.

3. Execution & Price Impact Risk

3.1. Market Impact of Large Orders

• Nature of Risk: OTC blocks in excess of $1 million can signal intent to the broader market, potentially moving price levels against your position during execution.
• Potential Impact: To mitigate, Abra Digital employs algorithmic slicing across counterparties; however, residual market-impact costs may still occur.

3.2. Arbitrage Execution Risk

• Nature of Risk: Our proprietary arbitrage engine depends on sub-second data feeds and low-latency execution. Network latency, partner-API throttling, or downtime can erode captured spreads.
• Potential Impact: Diminished arbitrage opportunities or negative P&L if expected price differentials close before order settlement.

4. Counterparty Risk in Liquidity Provision

4.1. Partner Reliability

• Nature of Risk: Abra Digital sources liquidity from a global network of exchanges, P2P platforms, and institutional partners. Any partner’s unexpected suspension or default can interrupt service.
• Potential Impact: Incomplete order fulfillment, delayed confirmations, or need for substitute counterparties at inferior rates.

4.2. Settlement Timing

• Nature of Risk: Settlement windows (T+0 to T+2) depend on bank-wire cut-offs and blockchain confirmation times. Congestion or failures can delay settlement beyond scheduled windows.
• Potential Impact: Extended counterparty exposure, funding gaps, or temporary mismatches in asset positions.

5. Corridor & Jurisdictional Risk

5.1. Regulatory Shifts

• Nature of Risk: Jurisdictions served (e.g., Turkey, UAE, Nigeria, India) may adjust crypto regulations, impose new compliance requirements, or restrict cross-border stablecoin transfers.
• Potential Impact: Rapid corridor closures, increased KYC/AML demands, or suspension of service until regulatory clarity is achieved.

5.2. Currency Controls & Convertibility

• Nature of Risk: Local currency restrictions (e.g., import/export limits, FX quotas) can hamper fiat on-/off-ramp operations.
• Potential Impact: Wider spreads, delayed funding, or the need to reroute orders through alternate corridors at higher cost.

6. Macro-Economic & Geopolitical Risk

6.1. Global Economic Shocks

• Nature of Risk: Events such as inflationary spikes, sovereign debt crises, or abrupt interest-rate hikes influence FX markets and stablecoin demand.
• Potential Impact: Unanticipated spread widening, increased slippage, or risk-off behavior reducing overall market liquidity.

6.2. Geopolitical Instability

• Nature of Risk: Political unrest, sanctions, or sanctions enforcement actions can affect partner operations and liquidity flow.
• Potential Impact: Immediate corridor disruptions, partner withdrawal, or forced settlement at off-market rates.

7. Algorithmic & Technology Risk

7.1. Model Risk

• Nature of Risk: Our pricing and routing algorithms are calibrated on historical and real-time data. Sudden regime changes or data-feed anomalies can degrade model performance.
• Potential Impact: Incorrect pricing signals, suboptimal execution routes, or increased volatility in execution outcomes.

7.2. Systemic Failures

• Nature of Risk: Outages in matching engines, partner APIs, or network infrastructure can block trade submissions or confirmations.
• Potential Impact: Missed trades, delayed fills, or inability to access account dashboards when critical decisions arise.

8. Mitigation Measures & Best Practices

8.1. Pre-Trade Consultation

• Engage our dedicated OTC desk to review corridor conditions, expected spreads, and settlement timelines before large orders.

8.2. Staggered Execution

• Consider splitting blocks into tranches to minimize market impact and manage liquidity risk.

8.3. Credit Limits

• Work with Abra Digital to establish credit lines aligned to your risk appetite and corridor usage patterns.

8.4. Real-Time Monitoring

• Use our portal for live pricing, order-status updates, and alert notifications on significant market movements.

9. Acknowledgment

By using Abra Digital’s services, you confirm that you have read, understood, and are prepared to accept the market risks outlined above. For further guidance or to discuss risk-management strategies, please contact your Abra Digital relationship manager or email support@abradigital.com.