Base
Simple Summary
A proposal to adjust 9 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| USDbC Collateral Factor | 76% | 69% |
| USDbC Supply Cap | 110,000 | 60,000 |
| USDbC Borrow Cap | 110,000 | 60,000 |
| USDbC Reserve Factor | 90% | 100% |
| DAI Supply Cap | 400,000 | 300,000 |
| DAI Borrow Cap | 300,000 | 200,000 |
| DAI Reserve Factor | 40% | 75% |
| DAI Collateral Factor | 80% | 50% |
| rETH Reserve Factor | 15% | 30% |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust IR parameters for USDC:
| USDC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.05 | 0.056 |
| Jump Multiplier | 9 | 9 |
Rationale
Risk Parameters
Continuing on the gradual reduction in USDbC and DAI exposure, Gauntlet recommends further decreases across caps and Collateral Factors (CF) along with increase in Reserve Factors (RF), in the case of USDbC, this would result in complete deprecation of the market. Along with the above, Gauntlet recommends an increase in RF for rETH in order to align caps closer to the prevailing market liquidity. We also recommend a change in IR curve for USDC.
Cap Recommendations
-
USDbC - In line with previous cap decreases, Gauntlet recommends reducing both the supply (110,00 → 60,000) and borrow caps (100,000 → 60,000) to further catalyze deprecation process.
-
DAI - Gauntlet recommends reducing supply caps (400,000 → 300,000) and borrow caps (300,000 → 200,000).
-
Gauntlet has enacted further cap changes as seen here via guardian prior to this proposal and therefore doesn’t include additional cap changes.
Reserve Factor
USDbC and DAI Supplies
The adjustments to the reserve factor have effectively shaped user behavior, as demonstrated in the visualization above. The increase from 75% to 90% on USDbC and 20% to 40% on DAI have successfully encouraged supplier outflows, aligning with the protocol’s objectives. To further accelerate these outflows and progress toward full asset deprecation, while bolstering reserve accumulation, Gauntlet now recommends increasing the reserve factor for USDbC from 90% to 100% and for DAI from 40% to 75%.
rETH
| Pool Type | Pool Name | TVL (million USD) | 24h Volume (USD) | URL |
|---|---|---|---|---|
| Balancer V2 (Base) | rETH / WETH / rETH-WETH-BPT 0.05% | 2.25 | 173,075.82 | Link |
| Uniswap V3 (Base) | rETH / WETH 0.05% | 0.20 | 172,366.97 | Link |
| Aerodrome (Base) | rETH / WETH | 0.17 | 7,214.45 | Link |
| Uniswap V3 (Base) | cbETH / rETH 0.05% | 0.03 | 202.34 | Link |
Total TVL: $2.65M
rETH supplies have trended upwards, with leverage looping strategies against WETH providing sufficient tailwinds. However, the current notional rETH supply on Moonwell is not balanced with respect to prevailing market liquidity. Although, the supplies are inflated ($2.85M Actuals) considering the recursive strategies with major positions posting Health Factor > 1, we recommend increasing the Reserve Factor for this asset to hedge against changing DEX liquidity. This would be achieved via 2 ways:
- Increase reserve accumulation to offset any potential insolvencies
- Reduce supply APRs, thereby reducing exposure to this asset. The proposed increase in RF would reduce supply APRs by 18%.
Collateral Factors (CF)
We recommend continuing incremental adjustments to the collateral factors for DAI and USDbC to enhance protocol resilience without impacting existing user positions. Specifically - Adjust DAI’s collateral factor from 80% to 50%, and Adjust USDbC’s collateral factor from 76% to 69%.
These measured reductions are designed to mitigate potential risks while ensuring that no liquidations are triggered for current borrowers.
IR Parameters
USDC IR Parameters
With increasing demand for leverage driven by trending markets, USDC utilization frequently breaches the kink threshold. Gauntlet recommends raising the borrow APR at kink by ~50 basis points to better align with market demand. However, we do not suggest a significant increase at this time, unlike MakerDAO, which recently raised the Sky Savings Rate to 8.5%. This recommendation considers the prevailing global macroeconomic trend of declining interest rates. Gauntlet will continue to monitor macroeconomic conditions and on-chain borrowing demand to reassess the USDC interest rate curves as needed.
Recommended USDC IR Curve
Projected APRs for USDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.04 | 4.08 |
| 100 | 95 | 85.54 |
Current APRs for USDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 4.5 | 3.65 |
| 100 | 94.5 | 85 |
Optimism
Simple Summary
A proposal to adjust 4 risk parameter:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| WBTC Reserve Factor | 60% | 100% |
| WBTC Collateral Factor | 60% | 50% |
| WBTC Supply Cap | 10 | 1 |
| WBTC Borrow Cap | 4 | 0.1 |
IR Parameters
A proposal to adjust IR parameters for USDC, USDT, DAI, wstETH and cbETH
| USDC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.05 | 0.056 |
| Jump Multiplier | 9 | 9 |
| USDT IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.05 | 0.056 |
| Jump Multiplier | 9 | 9 |
| DAI IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.05 | 0.056 |
| Jump Multiplier | 9 | 9 |
| wstETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0.02 | 0 |
| Kink | 0.45 | 0.35 |
| Multiplier | 0.065 | 0.061 |
| Jump Multiplier | 3 | 3.5 |
| rETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0.02 | 0 |
| Kink | 0.45 | 0.35 |
| Multiplier | 0.065 | 0.061 |
| Jump Multiplier | 3 | 3.5 |
Rationale
WBTC Deprecation
Based on the timeline of Reserve Factor increases mentioned in this post, we recommend to increase the RF to 100%. Apart from this we recommend further risk-off measures by reducing CF from 60% to 50% and supply caps to 1 WBTC and borrow caps to 0.1 WBTC. The decrease in CF will not trigger liquidations of user positions, however we would like to flag to the community about a position that is employing recursive strategy with HF of 1.02. The proposed decrease in WBTC collateral factor would result in a HF of 1.017.
| User Address | Total Supply Balance (USD) | Total Borrow Balance (USD) | Initial Borrow Usage | New Borrow Usage | Initial Health Factor | New Health Factor | % Closer to Liquidation |
|---|---|---|---|---|---|---|---|
| 0xfd4bf04bd8d0e7b8c7539f0cea970df25188e81b | $9.6M | $7.75M | 98.0% | 98.34% | 1.02 | 1.017 | 17.0% |
IR Parameters
USDC, DAI and USDT
For the same reasons cited in the Base market, we recommend increasing the borrow APR at kink by 50bps to mirror demand for leverage.
Recommended USDC, DAI and USDT IR Curve
Projected APRs for USDC, DAI and USDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.04 | 4.08 |
| 100 | 95 | 85.54 |
Current APRs for USDC, DAI and USDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 4.5 | 3.65 |
| 100 | 94.5 | 85 |
wstETH and rETH
The current IR curves for wstETH and rETH have deviated from market demand. The utilization has dropped below the kink, trailing at 35% for rETH and 25% for wstETH. We recommend the following changes to wstETH and rETH interest rate curves, aligning it with the levels proposed for the Base wstETH instance.
Recommended wstETH & rETH IR Curve
Projected APRs for wstETH & rETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 2.135 | 0.67 |
| 100 | 229 | 206 |
Current APRs for wstETH & rETH
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 0 |
| kink | 4.92 | 1.99 |
| 100 | 169 | 152 |
Moonbeam
Simple Summary
A proposal to adjust 6 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| WBTC.wh Borrow Cap | 0.75 | 0.5 |
| USDC.wh Collateral Factor | 45% | 42% |
| WETH.wh Collateral Factor | 41% | 38% |
| WBTC.wh Collateral Factor | 20% | 15% |
| WBTC.wh Reserve Factor | 60% | 100% |
Rationale
Risk Parameters
Cap Recommendations
After the recent moderate increase in borrow caps for xcUSDC and xcUSDT, Gauntlet does not recommend any additional risk adjustments for these assets at this time. Liquidity in the respective pools has not demonstrated sustained resilience and continues to decline, even as substantial volumes are observed on other chains. Gauntlet will actively monitor these trends and propose further adjustments if necessary.
Liquidity on 10/22/24
Liquidity on 11/19//24
Collateral Factor
We continue recommending a reduction in Collateral Factors across all Wormhole assets i.e. USDC.wh (45% → 42%), WETH.wh(41% → 38%), WBTC.wh (20% → 15%). The proposed reduction in CFs will not trigger any liquidations. However we would like to flag to the community on certain positions that are at-risk of liquidation.
| User Address | Total Supply Balance (USD) | Total Borrow Balance (USD) | Initial Borrow Usage | New Borrow Usage | Initial Health Factor | New Health Factor | % Closer to Liquidation |
|---|---|---|---|---|---|---|---|
| 0x00f18ccb682d2b6b935a3bbd3f1d237d263e05c0 | $164.7k | $55.4k | 87.06% | 94.01% | 1.149 | 1.064 | 53.71% |
| 0xece792e16f847add756d2c421801ff82999d2333 | $36.4k | $16.3k | 95.01% | 98.5% | 1.053 | 1.015 | 69.94% |
| 0xf896be986f5361f1810ba031e1cea367cabd8961 | $25.5k | $13.9k | 97.94% | 98.91% | 1.021 | 1.011 | 47.09% |
| 0x95922a5ffc70d272b87cd5d44e134df1aa331cd9 | $41.9k | $6.2k | 73.44% | 97.92% | 1.362 | 1.021 | 92.17% |
Reserve Factors
As mentioned in the most recent monthly recommendation, the reserve factors for WBTC.wh will be increased to 100%.
Moonriver
Simple Summary
A proposal to adjust IR parameters for FRAX, xcKSM and MOVR:
| FRAX IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.9 |
| Multiplier | 0.04 | 0.01 |
| Jump Multiplier | 3.5 | 1 |
| xcKSM IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0.02 | 0 |
| Kink | 0.45 | 0.45 |
| Multiplier | 0.035 | 0.01 |
| Jump Multiplier | 3.5 | 1 |
| WMOVR IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0.02 | 0 |
| Kink | 0.6 | 0.6 |
| Multiplier | 0.15 | 0.01 |
| Jump Multiplier | 3 | 1 |
Rationale
To further mitigate the accrual of debt on any insolvent positions, Gauntlet recommends tapering off the IR curves with low gradients for both slope1 and slope2.
IR Parameters
Recommended FRAX IR Curve
Projected APRs for FRAX
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.8 | 0.41 |
| 100 | 20.8 | 13.52 |
Current APRs for FRAX
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 3.2 | 1.66 |
| 100 | 73.2 | 47.56 |
Recommended xcKSM IR Curve
Projected APRs for xcKSM
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.45 | 0.132 |
| 100 | 55.45 | 36.4 |
Current APRs for xcKSM
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 0 |
| kink | 3.57 | 1.04 |
| 100 | 196.07 | 127.44 |
Recommended WMOVR IR Curve
Projected APRs for WMOVR
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 0.6 | 0.23 |
| 100 | 40.6 | 26.3 |
Current APRs for WMOVR
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 2 | 0 |
| kink | 11 | 4.29 |
| 100 | 130 | 85 |
Risk Dashboard
The community should use Gauntlet’s Moonwell Base Risk Dashboard to better understand the updated parameter suggestions and general market risk in Moonwell BASE.
Quick Links
Please click below to learn about our methodologies:
Gauntlet Parameter Recommendation MethodologyGauntlet Model Methodology
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Methodology
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.
Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Parameter recommendations seek to optimize for this objective function. Our agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to asset volatility, asset correlation, asset collateral usage, DEX / CEX liquidity, trading volume, expected market impact of trades, and liquidator behavior). Gauntlet’s simulations tease out complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the input metrics we show below can help understand why some of the param recs have been made but should not be taken as the only reason for recommendation. To learn more about our methodologies, please see the Helpful Links section at the bottom.