Basalt Vault

Basalt Vault loops a GMX v2 BTC/USD market token through Dolomite: GM is collateral, WBTC is borrowed and wrapped into additional GM until the vault reaches a 50% target loan-to-value. The WBTC hedge reduces directional BTC exposure but does not remove debt, liquidation, oracle, asynchronous-settlement or GM inventory risk. DefiLlama measured $120,396 on Arbitrum on 2026-08-16. The version-1 leveraged-looping dossier therefore rejects the exact investable strategy; describing it only as an AMM position omitted the more fundamental recursive borrowing and liquidation mechanism.

Review triggers: events that reopen the verdict
• A named unlevered product removes reinvested borrowing and liquidation from the client payoff and passes a separate review
• For any leveraged vault, exact debt, LTV, oracle, keeper, authority, audit and incident evidence is current and a proposed-size stressed full unwind repays debt without liquidation or unresolved settlement

Watched nightly: a warning on its venues or files, or a cited document that changes, reopens the memo. The first confirmation is due 2026-11-15.

The research file

Mechanism and class applicability

A USDC deposit is swapped into GMX v2 GM BTC/USD, deposited into a Dolomite isolation account, then used to borrow WBTC that is wrapped into more GM. The loop targets 50% LTV and repeats inside an NFT-bound vault. This is leveraged looping even though the collateral itself is an LP token: borrowed proceeds are reinvested into the yield-bearing collateral and the client bears debt and liquidation before ordinary LP comparison becomes decisive.

Control and loss applicability

Basalt describes immutable core contracts, patchable handler slots requiring the NFT owner’s approval, automated rebalancing within a 48%-52% band, owner intervention above 70% LTV and Dolomite liquidation near 83.8%. The product itself warns that the hedge is only pseudo-delta-neutral, contracts cannot be patched, Chainlink oracles can fail and GMX/Dolomite solvency is inherited. A keeper failure or market gap can therefore strand or liquidate the loop.

Accounting, lifecycle and exit

The DefiLlama adapter enumerates every factory NFT, reads each Dolomite isolation vault, adds GM collateral and subtracts WBTC debt; the result was $120,396 on Arbitrum on 2026-08-16. Withdrawal closes the Dolomite position, waits for GMX asynchronous unwrap, receives WBTC, and swaps through Uniswap v3 to USDC. Exit capacity is not the displayed net equity alone: it depends on repaying WBTC debt and executing both GMX and swap legs without crossing liquidation.

Comparison and measurable reopening test

Unlike unlevered ownership of GM, Basalt compounds both fee exposure and liquidation sensitivity by borrowing WBTC to acquire more GM. Unlike a direct BTC hedge, the residual delta, GM reserve mix and two-protocol control stack remain. Reopen only for an exact vault with leverage disabled, or after a named proposed allocation passes onchain LTV, debt, oracle, keeper, authority and audit review and completes a stressed full unwind with no liquidation, unresolved settlement or manager substitution.

Class rule

The leveraged looping class is outside the approved structures, so every protocol in it is not approved until the rule changes. The rule is about the structure, not an adverse finding about this protocol, and it is not a client instruction. The events that would reopen it are listed with the memo.

Sources

The claims above trace to these. Where a number could not be independently verified, the thesis says so.

• Basalt Vault — protocol and parameter overview · primary · accessed 2026-08-16
  Supports: GM collateral, WBTC debt, 50% target LTV, 83.8% liquidation, Arbitrum
• Basalt Vault — user guide and risks · primary · accessed 2026-08-16
  Supports: deposit loop, withdrawal path, residual delta, oracle risk, async settlement
• Basalt Vault — architecture · primary · accessed 2026-08-16
  Supports: NFT vault, Dolomite isolation account, keeper, handler controls, rebalancing
• Basalt Vault — deployed contracts · primary · accessed 2026-08-16
  Supports: factory, core contracts, Arbitrum deployment, verification perimeter
• DefiLlama adapter — Basalt net-equity accounting · secondary · accessed 2026-08-16
  Supports: factory enumeration, GM collateral, WBTC debt, Dolomite account, net TVL
• DefiLlama — Basalt Vault survey record · secondary · accessed 2026-08-16
  Supports: $120,396 TVL, Arbitrum, Yield category, current lifecycle

Inherited controls

The research above describes the protocol layer. Every position also inherits the asset it holds and the chain it settles on. The layer with the most administrative power sets the position’s effective control; that describes control, not quality or suitability.