We’ve commented previously on our support to add USDT as collateral to Avalanche v3. Removing USDT from isolation mode could provide users a buffer for liquidations by allowing users to open more diverse positions.
In the end, it is up to the community to determine whether or not they are concerned with the centralization risk associated with USDT. Our linked analysis only covers market risk and not smart contract risk, regulatory risk, or other technical risks.
We recommend maintaining LTV, LT, LB parameters and reducing supply and borrow caps. Our linked analysis recommended lowering supply caps to 20% (~130m) of the circulating supply to begin with. Given current low usage, we support lowering the supply caps further to 100m.
| Parameters | USDT (recommended) |
|---|---|
| Supply Cap | 100M |
| Borrow Cap | 80M |
| LTV | 75% |
| LT | 81% |
| LB | 5% |
| Isolation Mode | No |