[ARFC] Chaos Labs Risk Parameter Updates - sAVAX LT/LTV Adjustment

Summary

A proposal to increase sAVAX’s liquidation threshold and LTV on Aave V3 Avalanche.

Motivation

sAVAX is currently configured with a liquidation threshold (LT) of 45% and max loan-to-value (LTV) of 40%. Following our observations and simulations, we believe increasing the LT and LTV for this market is prudent.

sAVAX’s average market cap over the past 180 days is $257M, and its daily average volume is $3.1M. It has registered a daily annualized volatility of 90.88%, a 30-day annualized volatility of 74.11%, and its largest single-day price drop was 14.5%.

image - 2024-09-10T220448.350

Its supply is well distributed, with all but two of the top 10 suppliers leveraging the asset with WAVAX.

image - 2024-09-10T220451.011

Supply has been trending upward since the end of July.

image - 2024-09-10T220453.826

95.6% of the value of assets borrowed against sAVAX is WAVAX in E-Mode. USDC is the most popular non-E-Mode asset borrowed.

image - 2024-09-10T220456.605

Specification

Given these observations, we recommend increasing sAVAX’s LTV and LT and increasing its LTV in E-Mode by a small amount.

Asset Chain Market Current LTV Recommended LTV Current LT Recommended LT
sAVAX Avalanche Main 40% 50% 45% 55%
sAVAX Avalanche E-Mode 92.5% 93% 95% -

Next Steps

  1. Following community feedback, submit the ARFC for a snapshot vote for final approval.
  2. If consensus is reached, submit an Aave Improvement Proposal (AIP) to implement the proposed updates.

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this ARFC.

Copyright

Copyright and related rights waived via CC0

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