wstETH is in the Ethereum-correlated eMode pool on Arbitrum Aave v3. Recall the assumptions in Gauntlet’s eMode methodology for LSTs. The supply cap considers liquidity at both abnormal and normal price dislocations:
- (abnormal) maximum amount able to be liquidated within a 1-LT drop over a time range if the current liquidity is halved, with no additional liquidity inflow
- (normal) 20x corresponding to a 1% price drop, bounded by 50% of the onchain circulating supply.
We aim to revisit once the community has aligned on a risk preference as presented in the above forum post.