Summary
Chaos Labs supports the proposal to create a stataUSDC GSM on Base.
Analysis
We note that this proposal follows previous proposals to deploy an aUSDC GSM, which we supported at the time. This was then augmented with a proposal to create stataUSDT and stataUSDC GSMs; we supported this proposal, finding that shifting the GSM to a yield-bearing token representing deposits on Aave created limited additional risk.
As discussed in the prior recommendation, any potential risk arising from high utilization, which could potentially prevent users who switch from GHO to stataUSDC from withdrawing the underlying USDC, has not been borne out in the data.
While available liquidity (the amount borrowed subtracted from the amount supplied) did hit a low of 10.8K in October 2024, USDC’s supply has grown roughly four-fold since then (note that the anticipated listing of sUSDe on Base is likely to further increase USDC borrow demand and thus drive new supply, reducing the yield-dilution effects of the GSM adding new USDC supply).
Since USDC’s supply first broke 150M, the amount of available liquidity has never been fallen below 18M and currently stands at about 60M. This is sufficient to support the proposed GSM Bucket/Exposure cap of 10M. Additionally, we support the increase in the CCIP Bucket Capacity to reflect the additional GHO supplied to the GSM.
Impact
It is also likely that the creation of a GSM will improve utilization dynamics in the market. The GSM is expected to grow when GHO is above $1.00, which generally coincides with higher demand for stablecoins. This new setup would ensure that a growing GSM would be reflected in new USDC supply, reducing utilization. The reverse is expected to hold true in an inverse scenario: the GSM would decline in conjunction with less stablecoin demand, helping to keep utilization close to UOptimal by removing USDC supply.
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
Copyright
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