Following the launch of the GnosisChain market, we have observed high demand with several supply and borrow caps reaching high utilization.
While we continue to integrate the new Gnosis deployment into our simulation platform, the recommendations below were made utilizing Chaos’ supply and borrow cap framework for new assets and deployments, where we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact. Given the observed liquidity of the suggested assets, we recommend:
WXDAI, sDAI, USDC, EURe - doubling the supply cap and setting the borrow cap at 0.9*supply cap
wstETH - increase supply cap to 5,000
Specification
Chain
Asset
Current Supply Cap
Recommended Supply Cap
Current Borrow Cap
Recommended Borrow Cap
Gnosis
wstETH
4,000
5,000
400
No Change
Gnosis
WXDAI
1,500,000
3,000,000
1,500,000
2,700,000
Gnosis
sDAI
1,500,000
3,000,000
N/A
N/A
Gnosis
USDC
1,000,000
2,000,000
1,000,000
1,800,000
Gnosis
EURe
500,000
1,000,000
500,000
900,000
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.
Gauntlet supports the wstETH supply cap increase to 5000 and the sDAI supply cap increase to 3m.
We’ve stated in our original analysis of Gnosis that the biggest challenge is limited nonstable-stablecoin liquidity. While liquidity has increased via the wstETH-sDAI pool, a market sell of ~250 wstETH into stables via this wstETH-sDAI pool as well as the wstETH-staBAL pool incurs slippage of liquidation penalty ~6%.
As a result, we recommend more cautiously increasing caps for WXDAI, USDC, and EURe to balance weaker liquidity between stable-nonstables, facilitating recursive LST strategies, and stablecoin demand.
Given lower usages of xDAI, USDC, EURe
xDAI supply cap is at 66% usage, borrow cap at 53% usage
USDC supply cap is at 60% usage, borrow cap at 33% usage
EURe supply cap is at 50% usage, borrow cap is at 27% usage
