Overview
Chaos Labs supports listing FXS in Isolation Mode. Following is our analysis and risk parameter recommendations for the initial listing.
Liquidity and Market Cap
When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of FXS over the past 180 days was ~$480M, and the average daily trading volume was ~$19.5M (CeFi & DeFi).
Liquidation Threshold
Analyzing FXS price volatility over the past, we observed daily annualized volatility of 93.49% and 30-day annualized volatility of 47.26%. Considering this volatility, we recommend launching with an LT of 60%.
We support listing FXS as borrowable under reasonable limits of supply and borrow caps, as we do not observe a significant risk to the protocol by allowing to borrow the asset.
Debt Ceiling
Following Chaos Labs’ Isolation Mode Methodology, we recommend an initial debt ceiling of $4M. Under the methodology for Isolation Mode, we consider two levels of probabilities for extreme price drops - Medium-High and High. We estimate the probability of an extreme price drop for FXS as High.
Supply Cap, Borrow Cap, and Liquidation Bonus
Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.
Given the concentrated liquidity of FXS we recommend a 10% Liquidation Bonus and a derived supply cap of 800,000 FXS, and a borrow cap of 500,000 FXS.
Recommendations
We support the recommendations in the post for the Reserve Factor, Liquidation Protocol Fee, and Interest Rate curves.
Following the above analysis, we recommend listing FXS with the following parameter settings:
| Parameter | Value |
|---|---|
| Isolation Mode | Yes |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap (FXS) | 800,000 |
| Borrow Cap (FXS) | 500,000 |
| Debt Ceiling | $4M |
| LTV | 50.00% |
| LT | 60.00% |
| Liquidation Bonus | 10.00% |
| Liquidation Protocol Fee | 10.00% |
| Reserve Factor | 20.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 9.00% |
| Variable Slope2 | 300.00% |
| Uoptimal | 45.00% |
| Stable Borrowing | Disabled |
| Stable Slope1 | 13.00% |
| Stable Slope2 | 300.00% |
| Base Stable Rate Offset | 3.00% |
| Stable Rate Excess Offset | 5.00% |
| Optimal Stable To Total Debt Ratio | 20.00% |
| Flahloanable | Yes |
| Siloed Borrowing | No |
| Borrowed in Isolation | No |