[Gauntlet] USDC Market Risk Analysis

[inkymaze]

Gauntlet has recommended freezing Aave and Compound markets based on the de-pegging of USDC. At this moment, we do not recommend pausing the Moonwell market since our analysis indicates low insolvency risk given the USDC and FRAX collateral factors and usage. If USDC or FRAX prices fall below $.80, we recommend pausing the market.Concerning Aave and Compound, we are recommending to pause those markets based on the following reasons:

• Aave initiated an e-mode strategy for stable coins which created high collateral factors (97.5%) for USDC and other stable coins.
• Compound’s USDC price was pegged to $1 for their oracle feed in the v2 market
• Both protocols have higher collateral factors than Apollo and Artemis thus allowing for lower collateralization.

We will continue monitoring USDC and FRAX over the weekend.

[baconlard]

What would it mean to phase the moonwell markets? Would that only prevent borrowing of USDC or FRAX or would it also prevent supplying funds or repaying loans?

Also is there a link to the oracle(s) used to determine USDC and FRAX prices so we can self-monitor?

[majin]

Price Feed Contract Addresses | Chainlink Documentation

[jakeaujus]

An update from Gauntlet:
Since the depeg we have observed that no significant bad debt has been added to both Apollo and Artemis. We will continue to monitor and provide updates or recommendations as needed.

[ManMaxMove]

The US government promises to regulate this situation and not let the chess house fall. But the sad story of UST and Dong Kwon, haunts me.

[jakeaujus]

Gauntlet Market Risk Update for Moonwell 3/12/23

At the moment, we do not recommend pausing the Moonwell market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.80, we recommend pausing the market.

Overview

USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple other markets. Liquidity for USDC is still far below normal levels. We worked with the Moonwell core team to suggest next steps.

Key Metrics

Key Risks

1 - Price dip and recovery

If the price dips and recovers, liquidations will only process on the way up. Rational liquidators will not take on USDC collateral until they are confident they can unload it. This is exactly what we observed during the last dip on Friday on other protocols - you only get adverse liquidations

At the moment, we do not recommend pausing the Moonwell market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.80, we recommend pausing the market.

If USDC’s price falls below $0.80, Gauntlet is recommending that Moonwell should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.

• Estimated total liquidations since USDC’s depeg: ~$7.5k
• No significant new insolvencies have been observed since USDC’s depeg.

2 - Price stabilizes at a lower level

In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels.

Current Gauntlet Recommendations

Current Initiatives

• Link to forum post

• * This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date

[jakeaujus]

Gauntlet Market Risk Update for Moonwell (3/13/2023)

In our previous update, Gauntlet communicated that we do not recommend pausing additional markets, unless the price of USDC dropped to $0.80. That recommendation stands.

Additionally, the Treasury, Federal Reserve, and FDIC have stepped in to insure the deposits for SVB and Circle’s other key banking partners. In the meantime, we will continue monitoring and driving the other initiatives below.

Overview

USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple other protocols markets. Liquidity for USDC is still far below normal levels. We worked with the Moonwell core team to suggest next steps.

Key Metrics

Key Risks

1 - Price dip and recovery

At the moment, we do not recommend pausing the Moonwell market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.80, we recommend pausing the market.

If USDC’s price falls below $0.80, Gauntlet is recommending that Moonwell should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.

• Estimated total liquidations since USDC’s depeg: ~$7.5k
• No significant new insolvencies have been observed since USDC’s depeg.

2 - Price stabilizes at a lower level

In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels. In this case, the protocol will suffer a loss, but there is little to do here except freezing the stablecoin markets.

Current Gauntlet Recommendations

Current Initiatives

• Link to forum post

• * This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date

[jakeaujus]

Gauntlet Market Risk Update for Moonwell (3/14/2023)

In our previous update, Gauntlet communicated that we do not recommend pausing additional markets, unless the price of USDC dropped to $0.80. That recommendation stands.

Additionally, the Treasury, Federal Reserve, and FDIC have stepped in to insure the deposits for SVB and Circle’s other key banking partners. In the meantime, we will continue monitoring and driving the other initiatives below.

Overview

USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple other protocols markets. Liquidity for USDC is still far below normal levels. We worked with the Moonwell core team to suggest next steps.

Key Metrics

Key Risks

1 - Price dip and recovery

At the moment, we do not recommend pausing the Moonwell market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.80, we recommend pausing the market.

If USDC’s price falls below $0.80, Gauntlet is recommending that Moonwell should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.

• Estimated total liquidations since USDC’s depeg: ~$7.5k
• No significant new insolvencies have been observed since USDC’s depeg.

2 - Price stabilizes at a lower level

In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels. In this case, the protocol will suffer a loss, but there is little to do here except freezing the stablecoin markets.

Current Gauntlet Recommendations

Current Gauntlet Recommendations

jakeaujus

1

1d

Gauntlet Market Risk Update for Moonwell (3/13/2023)

In our previous update, Gauntlet communicated that we do not recommend pausing additional markets, unless the price of USDC dropped to $0.80. That recommendation stands.

Additionally, the Treasury, Federal Reserve, and FDIC have stepped in to insure the deposits for SVB and Circle’s other key banking partners. In the meantime, we will continue monitoring and driving the other initiatives below.

Overview

USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple other protocols markets. Liquidity for USDC is still far below normal levels. We worked with the Moonwell core team to suggest next steps.

Key Metrics

Key Risks

1 - Price dip and recovery

At the moment, we do not recommend pausing the Moonwell market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.80, we recommend pausing the market.

If USDC’s price falls below $0.80, Gauntlet is recommending that Moonwell should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.

• Estimated total liquidations since USDC’s depeg: ~$7.5k
• No significant new insolvencies have been observed since USDC’s depeg.

2 - Price stabilizes at a lower level

In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels. In this case, the protocol will suffer a loss, but there is little to do here except freezing the stablecoin markets.

Current Gauntlet Recommendations

Current Initiatives

• Link to forum post

• * This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date

[jakeaujus]

Moving forward, we will be providing the community with updates on USDC Market risk as needed as opposed to daily.

• USDC aggregate liquidity (across CEX and DEX sources) has recovered. Prior to the depeg, USDC’s -2% depth was around $287m; during the depeg, it fell to around $100m, and now it is $293m.
• USDC and FRAX have been stabilizing in price
• Moonwell continues to have $0 in new insolvencies (bad debt)