Hey jgTral,
Like you mentioned, iBTC liquidity on Moobeam is quite low at this moment in time (12.6 xcIBTC). I would personally love to see that number continue to increase, but as it currently stands enabling collateral on this asset wouldn’t be safe.
I’d encourage you to give Gauntlet’s “Asset Listing Framework” proposal a read through. If passed, these will become the established guidelines for adding new markets/setting initial parameters (like collateral factor).
Below is an excerpt from their Asset Listing Framework which goes into detail regarding the levels of liquidity needed to safely enable CF on an asset:
Sufficient liquidity is required for an asset prior to enabling it as collateral. A cautious test of this is the combined slippage across all liquidity sources to measure how well a given asset can be absorbed into the market (a signal that may change upon asset listing).
We recommend that the combined (CEX + DEX) slippage be less than 5% for a sell order of either $300k or 10% of total asset supplied in Moonwell (whichever is greater) before enabling an asset as collateral. Gauntlet formulated this guideline by analyzing existing assets in Moonwell and their supplies. Then, Gauntlet modeled what the market could healthily absorb using our combined slippage model.