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
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*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