Response to FRAX IR, xcUSDT Borrow Cap, and xcKSM Recommendations
Gauntlet has reservations about increasing the IR curve on FRAX based on the inelasticity of borrow positions. Utilization has stayed near the kink and hasn’t crossed the 84% as shown in the chart below.
Utilization has remained under 90%, ensuring it shouldn’t negatively impact liquidations. Gauntlet recommends not increasing the IR curve’s Multiplier for these reasons.
For xcUSDT, the community decided to increase the cap last month to 1.4M when there was relatively higher DEX liquidity and circulating supply. Since giving that recommendation, total xcUSDT supply has decreased to represent 98% of current borrow cap and DEX liquidity has decreased by 47% for (xcUSDT → USDC.wh) $1.1M to $520k. We do not support increasing xcUSDT’s borrow cap until liquidity has improved within the Moonbeam ecosystem.
The borrow cap decrease in xcKSM to 4.8k will freeze borrowing on the Moonriver market based on current usage of 8.8k. We do not recommend taking action to freeze xcKSM borrowing market at current borrow usage. We support lowering the borrowing cap to 11k.