USDC Recommendation to BASE
With Circle announcing Native USDC being live on BASE chain, Gauntlet is putting forward these risk recommendations for Native USDC:
Risk Parameter Recommendations
Risk Parameters
| Parameters | Gauntlet Rec |
|---|---|
| CF | 0.8 |
| Supply Cap | 10,000,000 |
| Borrow Cap | 5,000,000 |
| Protocol Seize Share | 0.3 |
Gauntlet recommends the same Risk Parameters as USDbC for this initial asset listing and will revisit once we can analyze user positions.
IR Parameters
| IR Parameters | USDC |
|---|---|
| BASE | 0 |
| Kink | 0.8 |
| Multiplier | 0.05 |
| Jump Multiplier | 2.5 |
| Reserve Factor | 0.15 |
Specifications
Global Token Liquidity and Market Stats
| USDC | |
|---|---|
| Market Cap | $25,872,999,832 |
| Circulating Supply | 25,956,537,559 |
| 2% Depth (DEX/CEX) | $114,860,324 |
USDC has large market caps and strong tokenomics across global chains. Based market tokenomics, this asset is a “blue chip” asset within the crypto space.
Local On-chain Token Liquidity and Market Stats
| USDC | |
|---|---|
| On-chain Circulating Supply | 157,005,511 |
| Curve 4pool TVL | $1,779,000 |
| 25% Liquidity Depth | $2,700,000 |
Curve has created a 4 asset liquidity pool to swap USDC. This is the only liquidity source for USDC on BASE as of this post. As such, we recommended more conservative supply and borrow caps compared to USDbC.
Supply and Borrow Caps
The primary recommendations for mitigating protocol risk when introducing new assets are the borrow and supply caps. Thus, Gauntlet recommends setting the borrow and supply caps strategically to allow for market growth while minimizing risk to the protocol.
Given that liquidators typically retained stablecoins during liquidations, the supply cap of the USDC poses less of a concern. Based on the on-chain circulating tokens and current usage of USDbC liquidity pool, we recommend the below caps:
| Asset | Cap Recommendation |
|---|---|
| Supply Cap | 10,000,000 ($10M) |
| Borrow Cap | 5,000,000 ($5M) |
With BASE working to faciliate migration of USDbC to USDC, we want to ensure there is adequate cap liquidity for Native USDC holders and users currently utilizing the USDbC liquidity pool to migrate.
IR Curves
Stable IR Curves (USDC)
Gauntlet recommends the same IR curves as the other stablecoins, USDbC and DAI.
Status of USDbC
Circle announced that BASE will be working with ecosystem partners to faciliate migration of USDbC to USDC. Gauntlet will not make any recommendations for USDbC at this time but we will continue to monitor USDbC’s on-chain liquidity conditions.
Gauntlet is currently working on USDC.e migration framework for the Arbitrum chain. We can work to utilize this strategy to eventually migrate Moonwell Base users to the native USDC liquidity pool.
Notes
- If the community opts to initiate a lending pool with collateral factors greater than 0, Gauntlet strongly advises the protocol to establish reserves within the pools as a precautionary measure against a Hundred Finance attack.
Next Steps
- Gauntlet and Warden will resolve which supply cap we should move forward on for the initial recommendation.