[Gauntlet] - MORPHO Recommendations
Summary
Gauntlet recommends onboarding MORPHO as collateral in Moonwell’s Core lending markets on Base. This decision follows a comprehensive evaluation of key risk factors, including liquidity, market depth, volatility, and overall asset suitability within the protocol’s risk framework.
We recommend setting a conservative Collateral Factor (CF) of 65%, and a Supply Cap aligned with slippage tolerance in the 25–30% range. The combination of a conservative CF and a relatively aggressive supply cap strikes a balance between risk mitigation and capital efficiency.
Risk Parameter Recommendations
| Parameters | Values |
|---|---|
| CF | 65% |
| Supply Cap | 1M MORPHO |
| Borrow Cap | 500K MORPHO |
| Protocol Seize Share | 30% |
IR Recommendations
| IR Parameters | Recommended |
|---|---|
| Base | 0 |
| Kink | 0.45 |
| Multiplier | 0.23 |
| Jump Multiplier | 5 |
| Reserve Factor | 0.3 |
Supporting Data
DEX TVL
| pool_name | pool_type | pool_url | pool_tvl_usd | volume_24h_usd |
|---|---|---|---|---|
| MORPHO / WETH 0.3% | aerodrome-slipstream | Link | $1.83M | $270.37K |
| MORPHO / WETH 0.3% | uniswap-v3-base | Link | $290.88K | $101.25K |
| MORPHO / USDC 1% | uniswap-v3-base | Link | $103.38K | $2.44K |
The total DEX TVL for MORPHO on Base is currently around $2M, with the majority of liquidity concentrated in the MORPHO <> WETH pool. A concentrated MORPHO <> WETH liquidity structure means MORPHO’s price stability is heavily dependent on WETH liquidity.
The overall liquidity remains relatively shallow. However, it is important to recognize that MORPHO is primarily a governance token within the Morpho ecosystem. Governance tokens often exhibit lower liquidity.
If adoption and incentives continue to expand, the liquidity constraints may gradually ease, making it a stronger candidate for increased collateral utility in the future.
Protocol TVL & Token Liquidity
Given all relevant factors, taking a cautious approach by a conservative Collateral Factor is advisable to minimize risks associated with potential liquidations in low-liquidity environments.
Liquidity & Slippage
5% Slippage
10% Slippage
25-30% Slippage
Executing a ~$1.5M MORPHO sell order in the current market conditions would result in an estimated 25-30% slippage.
Price Volatility
Over the past 180 days, MORPHO’s annualized daily log returns have fluctuated between a high of +36% and a low of -23%, reflecting the asset’s sensitivity to both upward momentum and downside corrections. The 30-day annualized log volatility is currently 183%, highlighting MORPHO’s exposure to substantial price swings over short time horizons.
IR Parameter Specifications
IR Curves
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 10.35% | 3.26% |
| 100 | 285.35% | 199.74% |
We recommend an IR curve with a borrow APR of 10.35% at kink.