# Market Volatility Risks

## Volatility Risks:

It is too complicated/impossible to completely and perfectly hedge against the volatility of the cryptocurrency market, as the aforementioned factors are too unpredictable for any given model. Even the most sophisticated strategies, such as employing shorts/AAVE borrowing, have only shown to be slightly effective, but never perfect. 

In order to completely understand GMD Protocol's respective Delta-Neutral strategy based on GMX and GLP, investors must first fully understand the **3 main risks involved with market volatility:**

1. Trader’s profit and losses from GLP pool
2. Impermanent loss due to price volatility + assets weight changes 
3. Volatility from small assets in the pool (Link, Uni)

## Tackling Volatility Risks:

Among these 3 main risks, Risk 1 works in favor of GLP, as traders statistically WILL lose over a long enough period of time. 

\=>To put this in GMD's Risk Hedging perspective, with the trading performance fee and the additional revenue from traders' losses, GLP has almost always been outperforming other indexes/LPs throughout its whole existence.

<figure><img src="https://lh4.googleusercontent.com/u9K1wJheWn7omRS8sGLTB-IJxhSW4aNOQkaUp6d0LjIPYt1_IWD_n7daI2j60kKORlpzaKmeDF_4yT-YUfi8D07to7X7cs3r1LXqrTeMsMsX4HuVH7PJdulozEnic970IjWNye_mGbJJqDs08P5awhxw_C25479wIFtd3UHNzn2lXsJz3HKTC1-IEw" alt=""><figcaption><p>GLP performance against other Indexes/LP</p></figcaption></figure>

Risks 2 and 3, however, are the most concerning as crypto is a volatile asset class and impermanent loss has always been a risk that liquidity providers, in this case, GMD Delta-Neutral Vaults Stakers, have to take.&#x20;

\=> This brought GMD Protocol to the creation of our **Pseudo-Delta-Neutral Strategy** with **a** **risk-absorbing reserve - Protocol's GLP RESERVE (THE RESERVE).**


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://gmd-protocol.gitbook.io/gmd-protocol/gmd-delta-neutral-strategy/market-volatility-risks.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.