The two proposed categories make a lot of sense. Here are some quick thoughts:
Stablecoin Correlated
As USDC is the most widely used asset here, we’ll focus on looking at market statistics w.r.t. USDC. Here is the data for each other stablecoin in terms of correlation to USDC and volatility.
| Asset | Correlation | Annualized Volatility |
|---|---|---|
| DAI | 0.6360134363523353 | 0.07520787797204237 |
| USDT | -0.9387355919442245 | 0.083167357372289349 |
| LUSD | 0.023164599938603453 | 0.38219685984517476 |
| SUSD | -0.10644733595207438 | 0.37559131823481279 |
| BUSD | 0.14708433181779257 | 0.20832720041021555 |
| TUSD | -0.03723445277966629 | 0.3592963910047251 |
| FRAX | -0.02534000257895037 | 0.25140117969517578 |
One thing to note when interpreting these volatility numbers: They are going to seem a bit high has they are annualized (from 12/22), but this is still an apples to apples comparison between stablecoins. We’ll update our analysis if these trends change over time
- DAI is an obvious one to include as its high usage and low risk
- It might make sense to not add USDT given the fact that it is highly uncorrelated with USDC (albeit it has small volatility)
- sUSD, LUSD, and TUSD do not seem to hold their peg as well as BUSD and DAI. They also have lower usage, so their are higher risk and lower value. That being said, the Aave community could bet on their growth and choose to include them here.
ETH Correlated
Right now, it seems like the community is pretty focused on keeping risk low. Given that, it is very unlikely that the wstETH and ETH pool should have this high of a LTV and Liquidation Threshold. Given the past price movements, potential price deviations, and recursive nature of potential positions in this assets, it would be more prudent to start the pool with a LTV of 85% and 90%, with a Liquidation Penalty of 3%. We’d be happy to push to increase these parameters later if the risks are appropriate.