Gauntlet’s BASE Recommendations
Simple Summary
Risk Parameters
A proposal to adjust 5 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| wstETH Collateral Factor | 76% | 77% |
| rETH Collateral Factor | 76% | 77% |
| cbETH Collateral Factor | 76% | 77% |
| USDC Borrow Cap | 8.5M | 12M |
| wstETH Supply Cap | 800 | 1000 |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust 1 IR curve:
| cbETH IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.45 | 0.45 |
| Multiplier | 0.07 | 0.06 |
| Jump Multiplier | 3.15 | 3.15 |
Rationale:
Risk Parameters
Our recommendations have an estimated VaR at $0 and remains unchanged. LaR increased to $1.17M from $1.16M with our current recommendations. Based on simulation results, Gauntlet recommends increasing the collateral factor for staked ETH asssets cbETH, rETH, and wstETH in order to improve capital efficiency.
Top wstETH Supply Accts
The largest 2 wstETH suppliers are not incurring any debt.
Top rETH Supply Accts
The largest rETH accounts either have no debt or have highly correlated or recursive positions within the BASE market.
Top cbETH Supply Accts
Excluding the 2nd largest position, all large cbETH collateralized positions are borrowing correlated assets or cbETH. The 2nd largest supplier of cbETH 0x3f7c10cbb has a 1.78 health factor with USDC & USDbC borrow positions.
BASE Liquidity
| Asset | Borrow Cap | Supply Cap | Borrow Cap Usage | Supply Cap Usage | DEX 25pct Slippage Token | DEX 25pct Slippage USD |
|---|---|---|---|---|---|---|
| USDC | 8,500,000 | 15,000,000 | 72.41% | 50.99% | 5,243,976 | $5,244,032.88 |
| cbETH | 1,000 | 6,000 | 59.89% | 51.00% | 1,242 | $2,995,018.64 |
| USDbC | 4,000,000 | 5,000,000 | 10.85% | 11.73% | 3,970,725 | $3,970,768.44 |
| WETH | 8,000 | 10,500 | 59.07% | 62.93% | 2,428 | $5,539,460.11 |
| DAI | 6,000,000 | 7,500,000 | 70.05% | 69.77% | 1,342,398 | $1,343,645.43 |
| rETH | 100 | 600 | 51.00% | 57.92% | 318 | $797,179.97 |
| WSTETH | 160 | 800 | 43.30% | 63.05% | 441 | $1,158,799.06 |
BASE Circulating Tokens and Supply Cap
| Asset | Circulating Supply | Supply Cap ($) | Supply Cap / Circulating Supply | Supply Cap Liquidity |
|---|---|---|---|---|
| USDC | 44,122,810 | $15,000,000.00 | 34.00% | $7,351,500.00 |
| cbETH | 19,492.00 | $15,070,560.00 | 30.78% | $7,384,574.40 |
| USDbC | 108,071,282 | $5,000,000.00 | 4.63% | $4,413,500.00 |
| WETH | 51,178 | $24,930,045.00 | 20.52% | $9,241,567.68 |
| DAI | 9,531,400 | $7,425,000.00 | 78.69% | $2,244,577.50 |
| rETH | 803 | $1,567,512.00 | 74.72% | $659,609.05 |
| WSTETH | 2,319 | $2,186,560.00 | 34.50% | $807,933.92 |
IR Parameters
cbETH IR Parameters
Utilization rates for cbETH have been relatively low since the initial listing of the asset on the protocol with utilization staying at or below 20%.
cbETH Utilization
Link to chart
Gauntlet intends to lower the Borrowing rate in order to promote more borrowing of cbETH and generate further reserves for the protocol.
Recommended cbETH IR Curve
Recommended APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 45 | 2.7 | 0.91125 |
| 100 | 175.95 | 131.9625 |
Current APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 45 | 3.149999999 | 1.063125 |
| 100 | 176.4 | 132.3 |
The Borrower APR at the kink is anticipated to drop by 45 basis points (bps) with the suggested interest rate (IR) curve. Depending on supplier and borrower elasticity, this move could potentially boost borrowing by $317,000, potentially increasing annualized reserves by $1,000. Other LST assets are still in the process of reaching their utilization equilibrium since their introduction in the Base market. Gauntlet will monitor their utilization and consider additional actions if their levels remain low.
Moonwell BASE Projected Revenue KPIs
Projected Annual Reserves as of Forum Post
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.
Supporting Data
The below figures show trends on key market statistics regarding borrows and utilization that we will continue to monitor:
Top 10 Borrowers’ Aggregate Positions & Borrow Usages
Top 3 debt positions on Base market are recursive.
Top 10 Borrowers’ Entire Supply
Link to Chart
Top 10 Borrowers’ Entire Borrows
Link to Chart
Utilization Rate of Assets - Timeseries
Link to Chart.
Borrow Cap Usage
Supply Cap Usage
Balances by User Strategies
The percentage of borrower balances utilizing LST Yield Farming continues to grow since our last market recommendation. The percentage has increased from 15.85% to 18.06%.
Stablecoin 25% Slippage on BASE
Non-Stablecoin 25% Slippage on BASE
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.
Moonbeam Recommendations
Simple Summary
A proposal to adjust 4 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| xcDOT Collateral Factor | 60% | 58% |
| USDC.wh Reserve Factor | 15% | 20% |
| xcUSDT Reserve Factor | 15% | 20% |
| xcUSDC Reserve Factor | 15% | 20% |
A proposal to make a IR curve adjustments for xcUSDC, xcUSDT, and USDC.wh:
| xcUSDC IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0.02 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.1 | 0.075 |
| Jump Multiplier | 1.9 | 6.0 |
| xcUSDT IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.065 | 0.075 |
| Jump Multiplier | 4.0 | 6.0 |
| USDC.wh IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.065 | 0.075 |
| Jump Multiplier | 4.75 | 6.0 |
Rationale:
Risk Parameters
Our recommendations maintain an estimated VaR at $0, unchanged from previous estimates. LaR decreased to $836k from $856k with our current recommendations. Based on simulation results, Gauntlet recommends decreasing the collateral factors for xcDOT in order to mitigate risk to the protocol. The collateral factors for WGLMR, WBTC.wh, xcUSDT, WETH.wh, and USDC.wh effectively balance risk with capital efficiency.
Frax Liquidity Pool
As mentioned in previous forum post, the FRAX market is experiencing a liquidity issue that the community is working to resolve. Gauntlet has put up previous proposals to mitigate the impact from the high utilization and we continue to monitor the market as the community works through the roadmap on the Nomad Incident Recovery.
xcDOT Top Supply Positions
4 out 5 of the top suppliers of xcDOT have borrow usage below 60%.
Gauntlet recommends decreasing the collateral factor for xcDOT from 60% to 58%. This decrease to collateral factor should not impact any users or cause any liquidations.
Moonbeam Liquidity
As we make recommendations through our risk models, we keep a constant check on the market liquidity and concentration risk to the Moonbeam protocol. In this regard, we would like to present some key liquidity figures for Moonbeam assets to share with the community. Since our last post, liquidity has decreased across all listed assets.
| Asset | Borrow Cap Relative to Supply | Total Circulating Supply | 25% Depth Token | 25% Depth USD | 25% Depth Token - Prev Month |
|---|---|---|---|---|---|
| WETH.wh | 20% | 2,517 | 25 | $55,724 | 19 |
| USDC.wh | 80% | 2,983,792 | 135,000 | $135,000 | 180,000 |
| WBTC.wh | 26% | 192 | 1.4 | $58,499 | 1.5 |
| xcUSDT | 136% | 957,399 | 140,000 | $140,000 | 145,000 |
| xcDOT | 91% | 936,083 | 27,000 | $150,390 | 18,000 |
| FRAX | 99% | 5,319,872 | 140,000 | $140,000 | 145,000 |
| WGLMR* | 184% | 12,252,369 | 500,000 | $148,589 | 400,000 |
*WGLMR circulating supply doesn’t include non-wrap tokens.
IR Parameters
USDC.wh and xcUSDT Utilization
USDC.wh and xcUSDT Borrow Rates
Since MIP-M11 was submitted on-chain, borrow rates have averaged between 14% to 16%. Gauntlet recommends further IR Curve and reserve factor adjustments to help mitigate high utilization. We will be adjusting the Jump Multiplier, Multiplier, and Reserve Factor higher. The Jump Multiplier increase will push borrower APR at full utilization to 126% from 100%. The borrow APR at kink will increase from 5.19% to 6%. The recommended values will be the same across all stablecoins within the Moonbeam markets. We will monitor the impact of these adjustments and make any further adjustments if necessary to maintain utlization at the kink.
IR Curve for USDC.wh, USDT, and xcUSDC
Recommended Borrow & Supply APR for USDC.wh, xcUSDT and xcUSDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 6 | 3.84 |
| 100 | 126 | 100.8 |
Current Borrow and Supply APR for USDC.wh and xcUSDT
| Utilization | USDC.wh Borrow APR | USDC.wh Supply APR | xcUSDT Borrow APR | xcUSDT Supply APR |
|---|---|---|---|---|
| 0 | 0 | 0 | 0 | 0 |
| 80 | 5.19 | 3.53 | 5.19 | 3.53 |
| 100 | 100.2 | 85.17 | 85.2 | 72.42 |
The current incentives for USDC.wh and xcUSDC yield approximately 11% APY, making recursive positions profitable in the Moonbeam market even with high utilization. Gauntlet recommends increasing reserve factors to reduce Supply APY by 6%, encouraging users to maintain utilization at the kink. As shown below, the top borrow positions across xcUSDT and USDC.wh are recursive.
Additionally, this increase in reserves will support the community’s decision to enhance liquidity in the FRAX market as voted in the Options for Enhancing Liquidity in the FRAX Market on Moonbeam snapshot.
xcUSDC IR recommendations implementation was delayed from our previous recommendations in December. This proposal will work to rectify the curve to match it with other stablecoins.
Moonwell Moonbeam Projected Revenue KPIs
Projected Annual Reserves
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.
Supporting Data
The below figures show trends on key market statistics regarding borrows and utilization that we will continue to monitor:
Top 10 Borrowers’ Aggregate Positions & Borrow Usages
Top 10 Borrowers’ Entire Supply
Link to chart
Top 10 Borrowers’ Entire Borrows
Link to chart
Utilization Rate of Assets - Timeseries
Link to chart
Borrow Cap Utilization
Moonbeam 2% Market Depth for non-Stables
xcUSDC Check-in
xcUSDC liquidity on Moonbeam ecosystem has not ramp up since initial listing.
Collateral Usage - Timeseries
Risk Dashboard
The community should use Gauntlet’s Moonbeam Risk Dashboard to better understand the updated parameter suggestions and general market risk in Moonbeam.
Value at Risk represents the 95th percentile insolvency value that occurs from simulations we run over a range of volatilities to approximate a tail event.
Liquidations at Risk represents the 95th percentile liquidation volume that occurs from simulations we run over a range of volatilities to approximate a tail event.
Gauntlet’s Moonriver Recommendations
Simple Summary
A proposal to adjust 3 risk parameters:
| Current Borrow Cap | Recommended Borrow Cap | |
|---|---|---|
| xcKSM | 11,000 | 14,000 |
| FRAX | 300,000 | 420,000 |
| WMOVR | 76,000 | 40,000 |
Rationale:
WMOVR Cap Recommendations
Gauntlet’s risk model estimates VaR at $2.7k and LaR at $57.8k based on current user positions and market conditions. FRAX, WMOVR and xcKSM’s collateral factors are effectively balancing risk and capital efficiency.
With the recent appreciation of MOVR and the outflow of MOVR borrow positions from the protocol. Gauntlet has recommended to reduce the borrow cap of WMOVR to 40k. This reduction is meant to help to protect the protocol from the varying liquidity within the ecosystem.
The Moonriver market experienced a large increase in TVL because of recent asset price appreciation and large inflow of supply to the FRAX LP.
Supply & Borrow Balance USD
Link to Chart
Supply & Borrow Balance
WMOVR and xcKSM supply slightly decrease in supply during the rally while FRAX supply experienced a large increase. Relative to our last recommendation, supply across all 3 markets have increase. xcKSM and FRAX have experience a 80% and 97% increase in supply, respectively.
Collateral Usage
Collateral Usage experienced a large increase during the recent market rally.
Collateralization Ratios
Weighted average collateralization for assets have increased with relative price appreciation and changes in user positions during the market rally.
xcKSM Cap Recommendations
Gauntlet recommends increasing xcKSM Borrow Caps to 14,000 driven by the recent increase in supply.
xcKSM Circulating Supply and Local Liquidity
Furthermore, existing local on-chain liquidity are likely sufficient to support the increase in borrow caps.
Top xcKSM Suppliers
Most of the top users who use xcKSM as collateral haven’t borrowed anything or are recursively borrowing for the most part.
FRAX Cap Recommendations
Gauntlet recommends increasing Borrow cap to 420,000 FRAX in order to match increasing borrow demand for FRAX.
FRAX Local Liquidity
Furthermore, existing local on-chain liquidity are likely sufficient to support the increase in borrow caps.
Top FRAX Suppliers
The largest FRAX Suppliers are borrowing uncorrelated assets or are non-recursive in their borrows. Gauntlet will continue to monitor these positions.
IR Parameters
When Gauntlet analyzes interest rate parameters, we prioritize two main objectives:
- Mitigating the risk of reaching 100% utilization in a pool.
- Maximizing the growth of the protocol reserve to provide coverage for potential insolvencies or future expenses.
For this recommendation, Gauntlet advises against making any adjustments to the interest rate curves, as they are already optimized to achieve these objectives.
Moonwell Moonriver Projected Revenue KPIs
Projected Annual Reserves
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.
Supporting Data
The below figures show trends on key market statistics regarding borrows and utilization that we will continue to monitor:
Top 10 Borrowers’ Entire Supply
Link to chart
Top 10 Borrowers’ Entire Borrows
Link to chart
Utilization Rate of Assets - Timeseries
Link to chart
Borrow Cap Utilization
Liquidations on Moonriver
Link to chart
During the market rally, there was approximately $40k of collateral liquidated.
Risk Dashboard
The community should use Gauntlet’s Moonriver Risk Dashboard to understand better the updated parameter suggestions and general market risk.
Value at Risk represents the 95th percentile insolvency value that occurs from simulations we run over a range of volatilities to approximate a tail event.
Liquidations at Risk represents the 95th percentile liquidation volume that occurs from simulations we run over a range of volatilities to approximate a tail event.
Quick Links
Please click below to learn about our methodologies:
Gauntlet Parameter Recommendation Methodology
Gauntlet Model Methodology
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