Emergency Controls

Managers have access to emergency controls that allow them to quickly de-risk a BSKT in adverse market conditions.

Emergency Stables

The Emergency Stables function converts the entire basket into approximately 95% USDT and 5% ALVA. The 5% ALVA allocation is retained to ensure the basket continues to hold at least two assets, avoiding single-asset composition which could raise regulatory classification concerns. This is designed for situations where:

• Constituent tokens are experiencing extreme volatility

• A token in the basket has a critical vulnerability

• Market conditions require immediate de-risking

When triggered, the BSKT enters a suspended state where normal operations (deposits, rebalancing) are paused. LP token holders retain their LP tokens, but the underlying assets are now held as stablecoins.

Revert Emergency

Once conditions stabilize, the manager can revert the emergency and restore the basket to its previous token allocation (or a new one). This re-enables normal operations.

The revert process works similarly to a rebalance: stablecoins are swapped back into the target tokens according to the specified allocation.

When to Use Emergency Controls

Emergency controls are a last resort. They should be used when:

• Immediate action is required and a standard rebalance would be too slow

• A constituent token is compromised (exploit, depegging, rug pull)

• Extreme market conditions make holding the current allocation dangerously risky

They should not be used for routine portfolio adjustments. Use standard rebalancing for that.

Impact on Investors

• LP tokens remain valid during emergency state

• The basket's value is preserved in stablecoins

• Redemptions may still be available depending on the contract state

• The manager should communicate via manager notes why the emergency was triggered