Moonwell community, please see the below updated analysis on the listing of these new assets. We’d note that the timing of launching new assets is a strategic community decision that should incorporate factors including market conditions.
Artemis Asset Listing Analysis, Nov 18, 2022
For new asset listings, Gauntlet’s goal is to ensure that insolvency and liquidity risks are minimized and that when liquidations occur, they can be done healthily with incentivized liquidators. We always recommend that Collateral Factor be set to 0 on the initial listing but should the community wish to enable these assets as collateral, we recommend implementing conservative initial parameters with the expectation that we will adjust the values over time once the initial inflow of market supply and demand has been realized.
We consider the following metrics and assess the risk factors when recommending parameters:
- Market cap of the token
- Total supply
- Largest liquidity sources (exchanges including CEX and DEX)
- Volatility (30 day, 90 day, 1 year)
- Average daily trading volume on CEX and DEX
- Other DEX metrics
Gauntlet does not assess bridge risk but we would recommend that the community take a conservative approach to initial listings because of inherent risks to bridged assets.
The underlying native assets represent 4 of the top 10 assets by market cap. The 30-day-average daily volume and 2% depth across CEX and DEX exchanges provide ample liquidity for both these stable and non-stable assets. This level of liquidity reduces the risk of oracle price manipulations.
Volatility of the native assets, as shown in the below table, are within normal expectations. The recent market downturn has impacted the volatility of BTC and ETH.
The bridge assets listed on the StellaSwap DEX have relatively low liquidity, as shown in the tables below. StellaSwap is the only major DEX market for these assets on Moonbeam. The liquidity of these assets were impacted further by the market downturn with liquidity decreasing by 38%-45% on Stellaswap. As shown in the Nov 16th table, the fully diluted market cap (# tokens on Moonbeam × token price) for these bridged assets is relatively low when comparing to xDOT ($16M) and FRAX ($6.8M). StellaSwap has at minimum 83% coverage for all four assets. We will continue to monitor on-chain liquidity of these assets moving forward.
Gauntlet has performed preliminary price slippage analysis on the StellaSwap DEX to capture the current price slippage for these Wormhole assets. The price slippage for these tokens are relatively high for BTC.wh and ETH.wh with the assets exceeding 5% slippage at $50k. High slippage can lead to liquidator inaction and insolvency and will impact our parameter recommendations.
Conclusion
Gauntlet has identified 3 potential risks for listing these new assets on Artemis. The 3 risks include macro liquidity risk and usage of new bridge for collateral assets:
- We do not have sufficient liquidator data to assess the use of the bridge when liquidating collateral on Artemis to access liquidity on other chains. Gauntlet’s review of previous liquidations has identify Artemis liquidators as utilizing Stellaswap. Without any data or information on the use of wormhole bridge to provide liquidity during a liquidation event, we will need to rely on liquidity within the Moonbeam chain.
- Onchain DEXes have extremely low liquidity. Stellaswap in particular currently only has $18M of liquidity across the entire system. Stellaswap has additional liquidity in the stableswap pool but this additional market liquidity does not address the liquidity risk for non-stable assets which could lead to insolvencies.
- The full fallout from the FTX blowup is yet to be concluded and potential further market distress could lead to additional liquidity outflows that we have yet to foresee. Right now we recommend being very conservative in order to hedge macro risks that are harder to quantify.
As such, we recommend the below initial parameters. Once we see more market dynamics such as pool usage and market liquidity, and ensure that there are no outstanding issues, we expect to adjust these values.
