Summary
A proposal to increase:
Ethereum
- USDT - supply and borrow cap
- FXS - supply cap
Motivation
The recommendations below were made utilizing Chaos’ supply and borrow cap methodologies and after analyzing user positions for each asset.
Please note that there are several other assets across V3 deployments with high supply and borrow cap utilization that were analyzed and do not have recommendations for an increase, given current market conditions. We maintain continuous monitoring of protocol usage and adjust our recommendations in response to evolving market conditions based on our simulations.
Ethereum
USDT
The supply and borrow cap for USDT on Ethereum V3 are currently at 86% and 83% utilization.
The recent increase in USDT borrows is mainly attributed to this account, which has borrowed 60M USDT against ~$110M WETH collateral.
Furthermore, there has been an increase in USDT supply, with a total of 80 million USDT added by eight distinct accounts, each supplying 10 million USDT. These accounts are currently not borrowing against their collateral. Given the size and timing of these deposits, we can assume they are connected and will continue monitoring the supply and borrow distribution ahead of additional recommendations.
Given the current supply and borrow distribution and in line with our methodologies, we recommend increasing the supply and borrow caps to 800M and 750M, respectively.
FXS
The supply cap for FXS on Ethereum V3 is currently at 84% utilization.
The recent increase in FXS supply is due to a single user supplying ~656.65K FXS, amounting to over 97% of the total supply. The user is currently not borrowing against his collateral.
Utilizing our supply cap methodology and given the debt ceiling set, we do not observe excess risk when increasing the supply cap for FXS on Ethereum. However, given the current concentration in a single user, we recommend a modest increase of the supply cap to 1.2M FXS.
Specification
| Chain | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum | FXS | 800,000 | 1,200,000 | 500,000 | No Change |
| Ethereum | USDT | 600,000,000 | 800,000,000 | 550,000,000 | 750,000,000 |
Next Steps
Once we receive feedback from @Gauntlet on the above recommendations, we will move forward to implement these updates via the Risk Steward process.
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
Copyright and related rights waived via CC0