Base Recommendations
Simple Summary
Risk Parameters
A proposal to adjust 5 risk parameters:
| Risk Parameter | Current Value | Recommended Value |
|---|---|---|
| WETH Supply Cap | 12,500 | 18,000 |
| WETH Borrow Cap | 10,500 | 14,000 |
| wstETH Supply Cap | 1,800 | 2,100 |
| wstETH Borrow Cap | 800 | 900 |
| USDbC RF | 15% | 20% |
*Cap Recommendations will be implemented via Guardian
IR Parameters
A proposal to adjust USDC’s IR curve:
| USDC IR Parameters | Current | Recommended |
|---|---|---|
| Base | 0 | 0 |
| Kink | 0.8 | 0.9 |
| Multiplier | 0.065 | 0.067 |
| Jump Multiplier | 8.6 | 9.0 |
Rationale:
Risk Parameters
Based on simulation results, Gauntlet recommends increasing caps for wETH and wstETH. Gauntlet also recommends increasing reserve factor for USDbC to further ramp up migration to native USDC, improve capital efficiency and increase reserves for the protocol.
Reserve Factor Recommendations
Gauntlet suggests raising Reserve Factors for USDbC to accelerate migration to USDC as well as catalyze deprecation of USDbC markets. USDbC has seen net outflows on the protocol prior to the Reserve Factor suggestion as seen int the above chart, whereas circulating supply for USDC has grown exponentially. By an RF increase from 15% to 20% brings USDbC’s Reserve Factor equivalent to DAI and will further improve reserves while users migrate to native USDC.
Cap Recommendations
Gauntlet suggests implementing a comprehensive adjustment to supply and borrow caps across various assets to optimize protocol performance and mitigate risks. This includes:
- wstETH - Scaling up both supply (1800 → 2100) and borrow caps (800 → 900) for wstETH, aligning with Gauntlet’s methodology for managing these parameters. Most of the top 10 suppliers borrow correlated assets.
- wETH - Adjusting wETH supply (12,500 → 16,000) and borrow caps (10,500 → 13,000) on Base to accommodate growing supply and borrow balances, at the back of growing liquidity conditions. Most of the top 10 suppliers borrow recursively.
BASE Liquidity
| Asset | Borrow Cap | Supply Cap | Borrow Cap Usage | Supply Cap Usage | DEX 25pct Slippage Token | DEX 25pct Slippage USD |
|---|---|---|---|---|---|---|
| rETH | 200 | 700 | 60.66% | 86.90% | 285 | $1,081,610.04 |
| wstETH | 800 | 1,800 | 86.90% | 85.93% | 424 | $1,695,031.81 |
| cbETH | 1,800 | 6,000 | 39.76% | 62.05% | 719 | $2,639,493.86 |
| DAI | 1,500,000 | 2,000,000 | 87.31% | 89.28% | 506,770 | $506,957.55 |
| USDbC | 4,000,000 | 5,000,000 | 16.73% | 19.17% | 8,559,407 | $8,559,602.08 |
| USDC | 18,200,000 | 20,000,000 | 79.29% | 99.98% | 6,913,693 | $6,913,850.36 |
| WETH | 10,500 | 12,500 | 86.05% | 91.79% | 962 | $3,325,471.47 |
BASE Circulating Tokens and Supply Cap
| Asset | Circulating Supply Tokens | Supply Cap | Supply Cap / Circulating Supply Cap (%) | Supply Balance |
|---|---|---|---|---|
| cbETH | 19,772 | 6,000 | 20.64 | $14,555,951 |
| WETH | 49,174 | 12,500 | 16.56 | $42,148,565 |
| DAI | 3,467,192 | 2,000,000 | 53.05 | $1,775,250 |
| USDC | 615,546,178 | 20,000,000 | 3.27 | $19,928,875 |
| rETH | 1099 | 700 | 63.69 | $2,427,575 |
| wstETH | 6,673 | 1,800 | 24.52 | $6,460,415 |
| USDbC | 73,045,404 | 5,000,000 | 9.25 | $ 1,188,701 |
IR Parameters
USDC IR Parameters
In line with current borrowing rates across the market while being competitive with peer protocols, Gauntlet recommends an increase in slope 1 to ~6% for USDC IR.
Demand for stablecoin borrowing
Given the surge in leverage demand in recent times, it’s imperative to adjust slope 1 for stablecoins to align with market needs and anticipate potential rate hikes.
Moonwell’s current adjustment in slope 1 ensures competitive USDC borrow rates while upholding market equilibrium.
Additionally, Gauntlet recommends raising the uOptimal from 80% to 90% to enhance capital efficiency. This recommendation is substantiated by the following chart indicating that the largest positions either borrow recursively or remain debt-free.
Link to chart
Gauntlet will continue to monitor borrow rates across the market and utilization on Moonwell to further adjust IR parameters.
Recommended USDC IR Curve
Projected APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 90 | 6.03 | 4.61 |
| 100 | 95.94 | 81.54 |
Current APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 5.19 | 3.53 |
| 100 | 99.95 | 74.96 |
Gauntlet will monitor the utilization of wETH and consider additional actions if levels remain below kink.
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 7 total risk parameters:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| xcUSDC Collateral Factor | 10% | 15% |
| WGLMR Collateral Factor | 58% | 57% |
| WGLMR Borrow Cap | 22,500,000 | 10,000,000 |
| WBTC.wh Borrow Cap | 50 | 5 |
| WETH.wh Borrow Cap | 500 | 100 |
| xcUSDT Reserve Factor | 20% | 25% |
| xcUSDC Reserve Factor | 20% | 25% |
A proposal to make a IR curve adjustments for USDC.wh:
| USDC.wh IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.0845 | 0.0875 |
| Jump Multiplier | 7.2 | 7.4 |
A proposal to make an IR curve adjustments for xcUSDC:
| xcUSDC IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.0814 | 0.0875 |
| Jump Multiplier | 7.0 | 7.4 |
A proposal to make a IR curve adjustments for xcUSDT:
| xcUSDT IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.0814 | 0.0875 |
| Jump Multiplier | 7.0 | 7.4 |
A proposal to make an IR curve adjustments for FRAX:
| FRAX IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.01 | 0.0563 |
| Jump Multiplier | 0.01 | 4 |
Rationale
Risk Parameters
Gauntlet recommends increasing collateral factor for xcUSDC, while reducing collateral factor for WGLMR further due to liquidity concerns. It is also recommended to reduce borrow caps for WBTC.wh, ETH.wh and WGLMR due to low utilization and in the interest of capping the risk to the protocol. Gauntlet recommends an increase in Reserve Factors for xcUSDC and xcUSDT to boost protocol reserves while balancing capital inflows.
WGLMR, WBTC.wh and WETH.wh Borrow Caps
The borrow cap utilization for WBTC.wh, ETH.wh, and WGLMR has consistently remained below 30%, indicating that the borrow caps are set higher than the current utilization levels. This exposes Moonwell to a heightened degree of risk. Gauntlet suggests reducing the borrow caps for these assets to effectively manage and limit risk exposure. This recommendation is reinforced by the presence of weak liquidity for WBTC.wh, ETH.wh, and WGLMR.
WBTC.wh Liquidity
WETH.wh Liquidity
WGLMR Liquidity
Although liquidity for WGLMR has been improving YTD, the liquidity is not sufficient to warrant the current borrow cap levels.
xcUSDC and WGLMR.wh Collateral Factor
xcUSDC’s on-chain liquidity has increased by 32.5% since the last month. The xcUSDC is redeemable for USDC across any chain via Circle’s APIs and Circle’s Mint platform. As such, liquidators can transfer to other parachains on Polkadot via the Polkadot Asset Hub (Has $18.6M in Supply), but will have to create an API via Circle to transfer to other chains. With gradual improvements in liquidity, on-chain circulating supply as well as liquidity on Polkadot’s asset hub, Gauntlet recommends increasing collateral factor to 15%. Gauntlet will monitor on-chain liquidity to further make any changes and will employ a phased approach to increase the collateral factor.
Gauntlet recommends reducing Collateral Factor of WGLMR to further cap risk, the decrease in Collateral Factor will not cause any liquidations on the protocol.
xcUSDC and xcUSDT Reserve Factor
An increase in reserve factor for xcUSDC and xcUSDT will boost projected annual reserves by $12,768 while incentivizing more organic borrowing over recursive borrowing. Gauntlet will monitor this market to see the impact of reserve factor on current user positions.
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 |
|---|---|---|---|---|
| WETH.wh | 29.97% | 1,668.86 | 14 | $37,000 |
| USDC.wh | 92.3% | 2,598,597 | 115,000 | $115,000 |
| WBTC.wh | 28.4% | 176.98 | 0.1 | $5,570 |
| xcUSDT | 84.2% | 951,702 | 115,000 | $115,000 |
| xcUSDC | 104.43% | 383,979 | 115,000 | $115,000 |
| xcDOT | 62.4% | 1,361,094 | 15,500 | $114,390 |
| FRAX | 98.7 | 5,319,872 | 140,000 | $140,000 |
| WGLMR | 233% | 9,616,587 | 280,000 | $114,104 |
IR Parameters
Utilization for stablecoin assets continue to spill over the kink often. In order to further assess market equillibrium/efficiency and further curb high utilization Gauntlet recommends to increase Multiplier and Jump Mulitplier for the USDC.wh, xcUSDT and xcUSDC. This recommendation is in line with the increase of borrow rates across markets to match market wide borrow rates while still being competitive. The Mulitplier will move borrow APR at kink by ~25bps. Post the succses of MIP-M22, it is imperative to adjust IR curves for FRAX’s market to levels that jump start organic borrowing. Gauntlet recommends adjusting slope 1 to 4.5% APR at kink from the current 0.8%.
Gauntlet will monitor the impact of these adjustments and make any further adjustments if necessary to maintain utlization closer to the kink.
USDC.wh
IR Curve for USDC.wh
Recommended Borrow and Supply APR for USDC.wh
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 7 | 4.2 |
| 100 | 155 | 116 |
Current Borrow & Supply APR for USDC.wh
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 6.76 | 4.05 |
| 100 | 150.76 | 113.06 |
xcUSDC
IR Curve for xcUSDC
Recommended Borrow and Supply APR for xcUSDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 7 | 4.2 |
| 100 | 155 | 116 |
Current Borrow & Supply APR for xcUSDC
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 6.51 | 4.16 |
| 100 | 146.51 | 117.21 |
xcUSDT
IR Curve for xcUSDT
Recommended Borrow and Supply APR for xcUSDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 7 | 4.2 |
| 100 | 155 | 116 |
Current Borrow & Supply APR for xcUSDT
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 6.51 | 4.16 |
| 100 | 146.51 | 117.21 |
FRAX
IR Curve for FRAX
Recommended Borrow and Supply APR for FRAX
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 4.5 | 3.0 |
| 100 | 84.5 | 71.82 |
Current Borrow & Supply APR for FRAX
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 0.8 | 0.54 |
| 100 | 1 | 0.85 |
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
Moonbeam 2% Market Depth for non-Stables
Risk Dashboard
The community should use Gauntlet’s Moonbeam Risk Dashboard to better understand the updated parameter suggestions and general market risk in Moonbeam.
VaR (Value at Risk) is defined as the expected insolvent amount (defined as excess debt relative to collaterals for any account) in a given day for a protocol under extremely adverse market conditions. We use our models to pre-configure specific risky market scenarios and stress test protocols via simulations leveraging current user positions, asset prices, and varied liquidity conditions. VaR is an estimate of the expected insolvencies for a single day given a severe correlated market downturn.
LaR is calculated as the expected liquidation amount under extremely adverse market conditions. It represents our estimation on what would happen if the market crashes, etc…
Moonriver recommendations
Simple Summary
A proposal to adjust 3 total risk parameter:
| Parameter | Current Value | Recommended Value |
|---|---|---|
| FRAX Reserve Factor | 15% | 25% |
| FRAX Collateral Factor | 57% | 53% |
| WMOVR Borrow Cap | 40,000 | 20,000 |
A proposal to make an IR curve adjustments for FRAX:
| FRAX IR Parameters | Current | Recommended |
|---|---|---|
| BASE | 0 | 0 |
| Kink | 0.8 | 0.8 |
| Multiplier | 0.05 | 0.0875 |
| Jump Multiplier | 2.5 | 7.4 |
Rationale:
Despite the availability of FRAX bridge, FRAX liquidity on-chain has been dropping since the start of the month. Gauntlet recommends reducing collateral factor and increasing reserve factor to facilitate smoother liquidations and bolster reserves for the protocol.
FRAX Liquidity
IR Parameters
FRAX utilization has consistently remained high over extended periods, largely due to the accumulation of interest on longstanding positions causing borrowing to exceed the supply. Gauntlet suggests increasing slope 1 to establish a borrowing APR of 7% at the kink point, while setting a supply APR of 4.2%. This adjustment aims to bring utilization closer to uOptimal levels.
FRAX Utilization
Recommended FRAX IR Curve
Projected APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 7.0 | 4.2 |
| 100 | 155 | 116.25 |
Current APRs
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0 | 0 | 0 |
| 80 | 3.99 | 2.71 |
| 100 | 54 | 45.9 |
Moonriver On-chain Liquidity
In shaping our recommendations via our risk models, we consistently monitor market liquidity and concentration risks pertaining to the Moonriver protocol. We aim to provide the community with pivotal liquidity metrics for Moonriver assets. The liquidity on Moonriver has not shown improvement since our last reccomendation cycle, however we believe xcKSM and WMOVR caps are in-tune with the on-chain liquidity available and further risk-on measures are not warrented. We recommend to continue monitoring the Moonriver market and ecosystem.
Current Liquidity for Rec
| Asset | 10% Liquidity Depth (#) | 10% Liquidity Depth ($) | 25% Liquidity Depth | 25% Liquidity Depth ($) |
|---|---|---|---|---|
| WMOVR | 820 | $16,669 | 2500 | $42,524 |
| xcKSM | 215 | $9,442 | 640 | $23,403 |
| FRAX | 25000 | $25,000 | 75000 | $75,000 |
Previous Liquidity for Rec
| Asset | 10% Liquidity Depth (#) | 10% Liquidity Depth ($) | 25% Liquidity Depth | 25% Liquidity Depth ($) |
|---|---|---|---|---|
| WMOVR | 1800 | $37,796 | 5600 | $97,108 |
| xcKSM | 500 | $22,166 | 1500 | $55,423 |
| FRAX | 25000 | $25,000 | 75000 | $75,000 |
Current Rec Cycle Metrics
| Asset | Circulating Supply | Supply Balance | Supply Balance / Circulating Supply | Borrow Cap | Borrow Cap / Circulating Supply |
|---|---|---|---|---|---|
| WMOVR | 90,817 | 153,101 | 168% | 40,000 | 44.44% |
| xcKSM | 44,086 | 32,427 | 73.55% | 14,000 | 31.76% |
| FRAX | 5,450,958 | 284,169 | 5.21% | 270,000 | 4.95% |
Previous Rec Cycle Metrics
| Asset | Circulating Supply | Supply Balance | Supply Balance / Circulating Supply | Borrow Cap | Borrow Cap / Circulating Supply |
|---|---|---|---|---|---|
| WMOVR | 199,689 | 156,011 | 78.12% | 40,000 | 38.47% |
| xcKSM | 69,909 | 39,038 | 55.84% | 14,000 | 16.17% |
| FRAX | 5,450,958 | 538,778 | 9.88% | 500,000 | 9.17% |
The circulating supply on the Moonriver market appears to be well-balanced in relation to borrowing caps. Hence, Gauntlet doesn’t recommend any cap changes for the above assets.
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.
Risk Dashboard
The community should use Gauntlet’s Moonriver Risk Dashboard to understand better the updated parameter suggestions and general market risk.
VaR (Value at Risk) is defined as the expected insolvent amount (defined as excess debt relative to collaterals for any account) in a given day for a protocol under extremely adverse market conditions. We use our models to pre-configure specific risky market scenarios and stress test protocols via simulations leveraging current user positions, asset prices, and varied liquidity conditions. VaR is an estimate of the expected insolvencies for a single day given a severe correlated market downturn.
LaR is calculated as the expected liquidation amount under extremely adverse market conditions. It represents our estimation on what would happen if the market crashes, etc…
Quick Links
Please click below to learn about our methodologies:
Gauntlet Parameter Recommendation Methodology
Gauntlet Model Methodology
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