[ARFC] CRV Aave V2 Ethereum - LT Reduction - 09.05.2023

CRV Aave V2 Ethereum - LT Reduction Update - 09.05.2023

Simple Summary

Update on CRV V2 Ethereum Deprecation Plan: No change to the CRV Liquidation Threshold (LT) this week.

Motivation

Following the CRV V2 Ethereum Deprecation Plan approved by the community and given the current market conditions and protocol usage, Chaos Labs and Gauntlet aligned on a 0% LT reduction this week.

Chaos originally proposed a 2% reduction, while Gauntlet proposed a 0% reduction. The individual analyses and considerations can be found below.

Chaos Labs Analysis

Chaos Labs recommends a 2% reduction, with the following impact on top CRV suppliers (used as collateral):

Account Total Supply (USD) Total CRV Supplied Total Borrows (USD) Health Health After Change
0x7a16ff8270133f063aab6c9977183d9e72835428 44.06M 101.28M 11.35M 1.82 1.75
0xc420c9d507d0e038bd76383aaadcad576ed0073c 1.97M 4.54M 440K 2.11 2.02
0xb5587a54ff7022ac218438720bdcd840a32f0481 1.71M 1.7M 1.08M 1.09 1.08
0x279a7dbfae376427ffac52fcb0883147d42165ff 794K 1.50M 404K 1.07 1.04
0xaecdde1672f3f121b3a6c43a2e0b5dfc28f6224c 480K 1.10M 212K 1.06 1.02

Gauntlet Analysis

Gauntlet recommends no change to the LT for CRV on Ethereum v2 this week.

Since our last update on 8/21, 22.14M CRV has been withdrawn and 3.55M USDT repaid by the user. Given their previous 14.81M USDT borrow position and current 11.32M USDT borrow position on Ethereum Aave v2, this represents a 23.57% reduction in remaining debt.

This corresponds to a decline in the user’s health factor to 1.85, despite the position reduction.

Daily CRV volatility is ~ 4.5%. Given that CRV liquidity has not materially improved, Gauntlet recommends having a sufficient buffer to the user’s historical HF maintenance levels. Based on Gauntlet’s deprecation schedule highlighted here, applying a 3-std buffer to the user’s historical health factor maintenance level of 1.6 would require a HF of 1.85, leaving insufficient room to reduce LT.

Given that we do not suggest an LT change this week, we recommend revisiting the LT reduction next week.

Next Steps

We will revisit CRV on Ethereum v2 and provide LT reduction recommendations next week.

Disclaimer

Gauntlet has not received any compensation from any third-party in exchange for recommending any of the actions contained in this proposal.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.

8 Likes

This topic was automatically closed 30 days after the last reply. New replies are no longer allowed.