@MatthewGraham @JeanBrasse @Dydymoon @zze - Gauntlet has conducted analysis from a market risk perspective and recommends the below:
Proposed risk parameters:
- LTV:
55%→ 45% - Liquidation threshold:
65%→ 60% - Liquidation bonus: 10%
- Reserve factor: 20%
Our analysis recommends more conservative initial risk parameters for CVX on Aave V2. In order to estimate potential initial user behavior, we analyzed the largest suppliers for CRV and their supply distribution as well as collateralization ratio. Although the market cap values and TVL values of CVX and CRV are fairly similar, the daily volume graphs of CVX and CRV are significantly different. The average daily traded volume for CVX is consistently lower than CRV. Considering total volume (instead of Messari real volume), CRV ADV (150MM USD) is still almost 700% larger than CVX ADV (21MM USD).
In addition to the lower initial LTV and liquidation threshold, we suggest lowering the liquidation bonus to 8.5% shortly after initial deployment (dependent on market conditions and the results of our economic simulations). Even for assets with low volume, our simulations indicate that Aave can safely lower liquidation bonus value especially if there is sufficient DEX liquidity. For reference, the Curve CVX/ETH pool has roughly 180MM USD in assets while the CRV/ETH pool has 215MM USD.
