Gauntlet Risk Analysis
From a market risk perspective, Gauntlet proposes to wait until emode is enabled and active before raising supply caps to 30k. If the community believes the current difference between the cap and supply is insufficient to test new borrower behavior, then Gauntlet supports raising the supply caps to 25k.
Gauntlet would like to stress that the risk profile of cbETH and the distribution of debt it supports will change when emode is activated. 90% of the debt is WETH currently in “emode” style borrowing, but with lower LT. It is important to understand what percentage of cbETH will be supplied in emode vs. non-emode because of the below risk analysis findings:
Insolvency Analysis
For non-emode, our models show that insolvencies occur if cbETH drops 25% (in USD value). For emode-borrowing, our models show that insolvencies occur if cbETH diverges from ETH by 7%. As such, the risk profiles of non-emode to e-mode differ. Thus, it will be important to understand what percentage of cbETH will be supplied in emode vs. non-emode when emode is enabled.