We consider this LRT’s historical tracking error to be risky. Even when accounting for ETH’s volatility over the last 90 days, the market price has consistently been +/- 1% the underlying NAV. Ideally, we’d like to see market price consistently remain within 1% of NAV over a longer period of time.

Using the slippage curve below and this LRT’s average daily volume, we consider the liquidity depth to be risky. Although a trade matching 20% of average daily volume does not create more than 5% price impact, a trade size matching ADV does. We estimate price impact by multiplying slippage by 2.5 and reduce by a factor of 6 if withdrawals are enabled.

We consider the current whale concentration for this LRT to be high. The largest whale holds more than 5% of the LRT’s total supply. We increase the threshold by a factor of 6 if withdrawals are enabled.