Base
Simple Summary
A proposal to adjust 4 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| USDbC Supply Cap | 110,000 | 1 |
| USDbC Borrow Cap | 110,000 | 1 |
| USDbC Collateral Factor | 69% | 63% |
| weETH Collateral Factor | 74% | 78% |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust IR parameters for USDC, EURC and cbBTC:
| USDC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.056 | 0.061 |
| Jump Multiplier | 9 | 9 |
| EURC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.056 | 0.061 |
| Jump Multiplier | 9 | 9 |
| cbBTC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.6 | 0.35 |
| Multiplier | 0.067 | 0.045 |
| Jump Multiplier | 3 | 2 |
Rationale
Risk Parameters
The proposal outlines a series of parameter adjustments aimed at recalibrating collateral and interest rate risk within the protocol’s assets —USDbC, weETH, USDC, EURC, and cbBTC. On the risk side, USDbC’s collateral factor is reduced and its supply/borrow caps are effectively set to 1. Furthermore, weETH’s collateral factor is increased, based on supply/borrow distributions.
On the yield curve side, the interest rate parameters for USDC, EURC, and cbBTC are re-caliberated. These modifications aim to better align marginal borrowing costs with target utilization rates and aim to optimize capital efficiency.
Cap Recommendations
-
USDbC - Gauntlet recommends reducing both the supply (110,00 → 1) and borrow caps (100,000 → 1) to deprecate this market.
-
Gauntlet has enacted further cap changes as seen here via guardian prior to this proposal and therefore doesn’t include additional cap changes.
Note on rETH
The liquidity and circulating supply of rETH have shown significant growth since the previous recommendation, with DEX TVL rising from $2.65M to $4.67M. At this time, we do not propose any additional risk adjustments for rETH. However, we will continue to monitor market dynamics closely and adjust rETH’s risk parameters as necessary to align with evolving conditions.
| Pool Type | Pool Name | Pool TVL (USD) | 24H Volume (USD) | URL |
|---|---|---|---|---|
| Balancer V2 Base | rETH / WETH / rETH-WETH-BPT 0.05% | $3,950,000 | $2,446,022.11 | Link |
| Uniswap V3 Base | rETH / WETH 0.05% | $420,000 | $721,799.89 | Link |
| Aerodrome Base | rETH / WETH | $210,000 | $8,456.98 | Link |
| Uniswap V3 Base | cbETH / rETH 0.05% | $40,000 | $36,886.23 | Link |
| Uniswap V3 Base | IMO / rETH 1% | $30,000 | $1,249.24 | Link |
| Aerodrome Base | rETH / WETH | $20,000 | $20.19 | Link |
Total TVL: $4.67 million
Collateral Factors (CF)
We recommend continuing incremental adjustments to the collateral factors for USDbC from 69% to 63%. The reduction in Collateral Factor will not force existing positions to be liquidated.
weETH
Gauntlet’s simulation methodology exhausts a variety of market risk scenarios against current and projected user profiles and behaviors. We aim to set values per asset that minimize the expected insolvency loss across such scenarios while continuing to provide a high degree of capital efficiency and sufficient growth prospects for the protocol. Per our analysis, we recommend the following changes to the parameters for weETH: LT 0.74 → 0.78
The largest positions in weETH are predominantly recursive, with 6 out of the top 10 positions borrowing WETH using weETH as collateral. Notably, the largest single position accounts for 50% of the total weETH supply. The recommended Collateral Factors incorporate sufficient buffers to withstand substantial price drawdowns against the dollar, ensuring the protocol’s resilience even in volatile market conditions.
IR Parameters
USDC IR Parameters
Gauntlet recommends a modest increase in borrowing APRs by an additional ~50bps for stablecoins to align with market conditions, especially considering the Sky Savings Rate (SSR) is currently set at 12.5%. This adjustment ensures competitive borrowing rates while maintaining the protocol’s ability to attract liquidity. However, we are avoiding a significant increase to remain responsive to evolving macroeconomic interest rate trends. This measured approach allows us to balance incentivizing borrowing demand with maintaining healthy utilization and rate stability across the platform.
Recommended USDC IR Curve
Projected APRs for USDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.49 | 4.44 |
| 100 | 95 | 85.54 |
Current APRs for USDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.04 | 4.08 |
| 100 | 95 | 85.54 |
EURC IR Parameters
Projected APRs for EURC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.49 | 4.44 |
| 100 | 95.5 | 85.9 |
Current APRs for EURC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.04 | 4.08 |
| 100 | 95 | 85.54 |
cbBTC IR Parameters
Utilization for cbBTC has continued to decline despite prior adjustments, indicating persistently low borrowing demand. To address this, Gauntlet recommends further reducing both the borrow APR and the kink level. Lowering the borrow APR from 4% to 1.57% would make borrowing cbBTC more attractive, enhancing competitive positioning and potentially driving incremental demand. Additionally, reducing the kink level will align the interest rate curve more closely with the current market conditions, optimizing incentives for borrowers while reducing overexposure to underutilized capital. These changes aim to stimulate utilization and improve the efficiency of capital deployment for cbBTC.
Recommended cbBTC IR Curve
Projected APRs for cbBTC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 1.57 | 0.49 |
| 100 | 131.5 | 118.4 |
Current APRs for cbBTC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 4 | 2.17 |
| 100 | 124 | 111.61 |
Optimism
Simple Summary
A proposal to adjust 4 risk parameter:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| WBTC Collateral Factor | 50% | 10% |
| WBTC Supply Cap | 1 | 0.0001 |
| WBTC Borrow Cap | 0.1 | 0.0001 |
| WETH Supply Cap | 10,000 | 12,000 |
IR Parameters
A proposal to adjust IR parameters for USDC, USDT,and DAI
| USDC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.056 | 0.061 |
| Jump Multiplier | 9 | 9 |
| USDT IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.056 | 0.061 |
| Jump Multiplier | 9 | 9 |
| DAI IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.9 | 0.9 |
| Multiplier | 0.056 | 0.061 |
| Jump Multiplier | 9 | 9 |
Rationale
Supply and Borrow Caps
- WETH - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the supply caps (10,000 → 12,000) for WETH. Currently, 7 of the top 10 positions are recursive, while the remainder are supply-only or are borrowing USDC against their collateral.
WBTC Deprecation
Post increasing Reserve Factor to 100%, we propose reducing the collateral factor (CF) from 50% to 10% to significantly mitigate systemic risk. Additionally, we recommend setting supply caps at 0.0001 WBTC and borrow caps at 0.0001 WBTC. These adjustments are designed to minimize the protocol’s exposure and ultimately depcreate WBTC. The below position will have an HF of 1.08 post the CF changes, and therefore will not be liquidated.
| 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 |
|---|---|---|---|---|---|---|---|
| 0x7ff72a5082cde8c7c31c4e8a17bea2606735eb76 | $17.3k | $5.3k | 49.91% | 92.3% | 2.004 | 1.083 | 84.63% |
IR Parameters
USDC, DAI and USDT
For the same reasons cited in the Base market, we recommend increasing the borrow APR at kink by an additional 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 | 5.49 | 4.44 |
| 100 | 95.5 | 85.9 |
Current APRs for USDC, DAI and USDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| kink | 5.04 | 4.08 |
| 100 | 95 | 85.54 |
Moonbeam
Simple Summary
A proposal to adjust 6 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| WBTC.wh Borrow Cap | 0.5 | 0.1 |
| USDC.wh Collateral Factor | 42% | 39% |
| WETH.wh Collateral Factor | 38% | 33% |
| WBTC.wh Collateral Factor | 15% | 14% |
| xcDOT Reserve Factor | 35% | 50% |
| WGLMR Reserve Factor | 35% | 50% |
Rationale
Risk Parameters
Collateral Factor
We continue recommending a reduction in Collateral Factors across all Wormhole assets i.e. USDC.wh (42% → 39%), WETH.wh(38% → 33%), WBTC.wh (15% → 14%). 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 | $189.5k | $67.2k | 86.13% | 93.96% | 1.161 | 1.064 | 56.45% |
| 0xece792e16f847add756d2c421801ff82999d2333 | $26.9k | $10.2k | 89.03% | 95.55% | 1.123 | 1.047 | 59.43% |
| 0x5b1419e3b2ab4f55178c14b7d1d5326d9fcb5dec | $19.8k | $8.7k | 92.22% | 96.6% | 1.084 | 1.035 | 56.3% |
| 0x95922a5ffc70d272b87cd5d44e134df1aa331cd9 | $48.1k | $7.7k | 92.9% | 98.33% | 1.076 | 1.017 | 76.48% |
Reserve Factor
xcDOT Supplies vs DEX Liquidity
WGLMR Supplies vs DEX Liquidity
The supplies of xcDOT and WGLMR have notionally increased on Moonwell; however, the current notional supply of these assets on Moonwell is disproportionate to the available market liquidity. While supplier positions maintain a Health Factor above 1, we recommend increasing the Reserve Factor for these assets to mitigate risks associated with fluctuations in DEX liquidity. This approach would achieve two key objectives:
- Enhance reserve accumulation to safeguard against potential insolvencies.
- Lower supply APRs, thereby reducing exposure to these assets. The proposed Reserve Factor adjustment would lead to an estimated 23% reduction in supply APRs for both WGLMR and xcDOT
Moonriver
Gauntlet does not recommend any risk parameters for the Moonriver market at this time.
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.