I found the awkward part of a TermMax vault only after tracing what happens when maturity goes wrong. A depositor can reach withdrawal time and still find that the vault does not have enough debt-token liquidity to pay them out.
The reason is buried in settlement. If a borrower misses the fixed maturity, the position is flagged for liquidation. If that liquidation is incomplete, TermMax does not keep forcing a sale until every FT is paid in cash. Physical delivery starts instead. The remaining collateral is delivered into the pool, and FT redemption becomes a proportional mix of underlying debt token and collateral.
That changes the job for a vault depositor. The quoted fixed return can be correct while the asset available for withdrawal is temporarily the wrong shape. The vault may own collateral when I expected debt-token liquidity, so I may have to wait for liquidity to return rather than exit on schedule.
I like this design because it refuses to pretend thin collateral is instantly sellable. But it also exposes the real pressure point: fixed yield does not guarantee fixed liquidity.
If TermMax keeps expanding into tokenized stocks and other less-liquid collateral, I would watch the vault's post-maturity liquidity as closely as the headline rate.
#TermMax @TermMax
The reason is buried in settlement. If a borrower misses the fixed maturity, the position is flagged for liquidation. If that liquidation is incomplete, TermMax does not keep forcing a sale until every FT is paid in cash. Physical delivery starts instead. The remaining collateral is delivered into the pool, and FT redemption becomes a proportional mix of underlying debt token and collateral.
That changes the job for a vault depositor. The quoted fixed return can be correct while the asset available for withdrawal is temporarily the wrong shape. The vault may own collateral when I expected debt-token liquidity, so I may have to wait for liquidity to return rather than exit on schedule.
I like this design because it refuses to pretend thin collateral is instantly sellable. But it also exposes the real pressure point: fixed yield does not guarantee fixed liquidity.
If TermMax keeps expanding into tokenized stocks and other less-liquid collateral, I would watch the vault's post-maturity liquidity as closely as the headline rate.
#TermMax @TermMax