Gauntlet’s WELL Recommendation
Summary
We recommend onboarding WELL as collateral on Moonwell’s Base instance. For Optimism, we suggest delaying the listing of WELL until liquidity conditions improve.
Risk Parameter Recommendations
Base
| Parameters | Values |
|---|---|
| CF | 65% |
| Supply Cap | 75,000,000 (~$4.7M) |
| Borrow Cap | 37,500,000 (~$2,3M) |
| Protocol Seize Share | 3% |
IR Recommendations
| IR Parameters | Recommended |
|---|---|
| Base | 0 |
| Kink | 0.45 |
| Multiplier | 0.22 |
| Jump Multiplier | 3 |
| Reserve Factor | 0.25 |
Supporting Data
Volatility & Max DD
The maximum and minimum daily log returns for WELL are 21% and -22.93% respectively over the past 180 days. Given the volatility exhibited by WELL we recommend that Collateral Factor to align with that of AERO. We therefore recommend a CF of 65%
Supply and Borrow Caps
Borrow and supply caps are the primary parameter recommendations we can make to mitigate protocol risk when listing new assets. Gauntlet recommends setting the borrow and supply caps strategically with available liquidity on-chain. On Base, there is sufficient liquidity to trade upto 75M worth of WELL tokens with a slippage of 25% signalling a maximum cap setting of WELL tokens at this level. We recommend setting the borrow cap at 37.5M accordingly to adjust for kink level and provide sufficient buffer to prevent any governance exploits given the quorum requirements.
IR Parameter Specifications
WELL IR Curves
| Utilization | Borrow APR | Supply APR |
|---|---|---|
| 0% | 0 | 0 |
| 45% | 9.9% | 3.3% |
| 100% | 174.4% | 131.3% |
We recommend an IR curve with a kink at 45% and borrow APR of 9.9% at kink.