Base
Simple Summary
A proposal to adjust 3 risk parameters:
Risk Parameter | Current Value | Recommended Value |
---|---|---|
wrsETH Supply Cap | 1,075 | 1,300 |
rETH Supply Cap | 1,200 | 1,320 |
DAI Reserve Factor | 75% | 100% |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust IR parameters for USDC, and cbBTC:
USDC IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.9 | 0.9 |
Multiplier | 0.061 | 0.067 |
Jump Multiplier | 9 | 9 |
cbBTC IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.35 | 0.35 |
Multiplier | 0.045 | 0.07 |
Jump Multiplier | 2 | 2 |
Rationale
Risk Parameters
The proposal outlines a series of parameter adjustments aimed at recalibrating risk parameters within the protocol’s assets. On the risk side, Gauntlet recommends an increase in supply caps for wrsETH and rETH based on market conditions discussed below.
On the yield curve side, the interest rate parameters for USDC, 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
-
wrsETH - Gauntlet recommends increasing the supply caps for wrsETH from 1,075 → 1,300. This is based on the current largest suppliers of wrsETH and prevailing market liquidity. The largest supplier has put up close to ~$1.4M worth of wrsETH as collateral with stablecoin borrows. The rest of the top 10 positions are supplying wrsETH with either stablecoin or WETH borrows.
Given a Collateral Factor of 74%, there is ample buffer to absorb the top 3 positions in the event of liquidation without incurring substantial slippage relative to the buffer.
-
rETH - Gauntlet recommends increasing the supply caps for rETH from (1,200 → 1,320). The largest suppliers has collateralized their position with close $500k of rETH along with other WETH correlated assets. The rest of the top 10 positions are supplying rETH with either stablecoin or WETH borrows.
The DEX TVL for rETH has continued to increase from $4.7M to currently $5.15M. The above cap increases are supported by the DEX liquidity.
Reserve Factor
Given the successful snapshot to add USDS on Moonwell Core market, Gauntlet recommends aiding full deprecation of the DAI market by scaling reserve factor to 100%.
IR Parameters
USDC IR Parameters
Gauntlet recommends further increase in borrowing APRs by an additional ~50bps for stablecoins to align with market conditions as the SSR continues to have a floating rate of 12.5%. This adjustment ensures competitive borrowing rates while maintaining the protocol’s ability to attract liquidity. However, we advise against applying the same interest rate adjustments to EURC for now, as its usage dynamics differ from that of USDC (see below for utilization 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 | 6.03 | 4.88 |
100 | 96 | 86.4 |
Current APRs for USDC
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 5.49 | 4.44 |
100 | 95 | 85.54 |
cbBTC IR Parameters
Utilization for cbBTC has continued to decline despite prior adjustments, indicating persistently low borrowing demand. This is further highlighted post the reduction in kink and borrow APRs implying that borrowing demand has not sustained. Given the increasing supplies as seen from the trends below and overall declining borrows, Gauntlet recommends optimizing for the supply APR and align these to the broader market rates.
Recommended cbBTC IR Curve
Projected APRs for cbBTC
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 2.45 | 0.77 |
100 | 131.5 | 118.4 |
Current APRs for cbBTC
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 1.57 | 0.49 |
100 | 131.5 | 118.4 |
Optimism
Simple Summary
A proposal to adjust 5 risk parameter:
Risk Parameter | Current Value | Recommended Value |
---|---|---|
weETH Supply Cap | 560 | 860 |
VELO Supply Cap | 35,000,000 | 42,000,000 |
WETH Borrow Cap | 9,500 | 11,000 |
weETH Collateral Factor | 74% | 78% |
WBTC Collateral Factor | 10% | 0.1% |
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 | 0.061 | 0.067 |
Jump Multiplier | 9 | 9 |
USDT IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.9 | 0.9 |
Multiplier | 0.061 | 0.067 |
Jump Multiplier | 9 | 9 |
DAI IR Parameters | Current | Recommended |
---|---|---|
Base | 0 | 0 |
Kink | 0.9 | 0.9 |
Multiplier | 0.061 | 0.067 |
Jump Multiplier | 9 | 9 |
Rationale
Supply and Borrow Caps
-
weETH - In accordance with Gauntlet’s methodology for managing parameters, we propose scaling up the supply caps (560 → 860) for weETH. Currently, except for one position, the rest of the positions in the top 10 are borrowning recursively. Furthermore, the liquidity is sufficient to support current caps with minimal slippage.
-
VELO - We recommend increasing supply caps for VELO from 35,000,000 → 42,000,000. There is sufficient DEX liquidity to facilitate the liquidation of the top 10 largest suppliers given the conservative collateral factors for this asset.
-
WETH - We recommend aligning the borrow cap for WETH to a level marginally above the kink. We therefore recommend a borrow cap of 11,000 WETH. This increase is further supported by steady borrow cap utilization around the threshold.
Collateral Factors
weETH
To align with Collateral Factors on the Base market, Gauntlet recommends increasing the CF for weETH from 0.74 → 0.78. This is based on Gauntlet’s simulation methodology which exhausts a variety of market risk scenarios against current and projected user profiles and behaviors. The objective is to set values per asset that minimize the expected insolvency loss across scenarios while continuing to provide a high degree of capital efficiency and sufficient growth prospects for the protocol.
The largest positions in weETH are predominantly recursive, with 9 out of the top 10 positions borrowing recursively using weETH as collateral. The recommended Collateral Factors incorporate sufficient buffers to withstand substantial price drawdowns, ensuring the protocol’s resilience even in volatile market conditions.
WBTC deprecation
We propose reducing the collateral factor (CF) from 10% to 0.1% to aid in full deprecation of this market. These adjustments are designed to minimize the protocol’s exposure and ultimately depcreate WBTC. The reduction in CF will not trigger any liquidations.
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, USDT and DAI
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 6.03 | 4.88 |
100 | 96 | 86.4 |
Current APRs for USDC, USDT and DAI
Utilization | Borrow APR | Supply APR |
---|---|---|
0 | 0 | 0 |
kink | 5.49 | 4.44 |
100 | 95 | 85.54 |
Moonbeam
Simple Summary
A proposal to adjust 3 total risk parameters:
Parameter | Current Value | Recommended Value |
---|---|---|
USDC.wh Collateral Factor | 39% | 36% |
WETH.wh Collateral Factor | 33% | 28% |
WBTC.wh Collateral Factor | 14% | 11% |
Rationale
Risk Parameters
Collateral Factor
We continue recommending a reduction in Collateral Factors across all Wormhole assets i.e. USDC.wh (39% → 36%), WETH.wh(33% → 28%), WBTC.wh (14% → 11%). The proposed reduction in CFs will trigger liquidations of positions totaling ~$700 in supplies and ~$200 in borrows. The positions poised to be liquidated are listed below.
User Address | Total Supply Balance (USD) | Total Borrow Balance (USD) | Initial Borrow Usage | New Borrow Usage | Initial Health Factor | New Health Factor |
---|---|---|---|---|---|---|
0xe6c94137b9276def90c19776679ed9723fa701bd | 306 | 117.43 | 0.985 | 1.067 | 1.015 | 0.937 |
0xce02ff4ad39201a05fdb98de1b292cab26702c9b | 138 | 44.42 | 0.972 | 1.146 | 1.028 | 0.873 |
0xbbf5f02b352f6743181bd63b194410d26dcfa812 | 149 | 19.94 | 0.957 | 1.218 | 1.045 | 0.821 |
0xbc0c97afdd83a4ae1f46e5f5fd7a627b770c0982 | 68 | 7.84 | 0.824 | 1.049 | 1.214 | 0.954 |
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.