# \[ARFC\], Gauntlet recommendation to lower stMATIC, MaticX non-emode LT, pt 2

**URL:** <https://governance.aave.com/t/arfc-gauntlet-recommendation-to-lower-stmatic-maticx-non-emode-lt-pt-2/15314>\
**Category:** Governance\
**Created:** [November 2, 2023, 7:51pm UTC](https://governance.aave.com/t/arfc-gauntlet-recommendation-to-lower-stmatic-maticx-non-emode-lt-pt-2/15314 "2023-11-02T19:51:58Z")\
**Posts on this page:** 1\
**Showing post:** 4

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**Author:** ![Gauntlet](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/gauntlet/32/4064_2.png) [@Gauntlet](https://governance.aave.com/u/Gauntlet)\
**Post date:** [November 16, 2023, 4:07pm UTC](https://governance.aave.com/t/arfc-gauntlet-recommendation-to-lower-stmatic-maticx-non-emode-lt-pt-2/15314/4 "2023-11-16T16:07:34Z")

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Hey @ChaosLabs, thanks for the feedback here. As a risk manager, Gauntlet’s updates to stMATIC / MaticX LT are **meant to be proactive to risk, instead of reactive.** The risks we have identified include the following.

- increased stablecoin borrowing against LST collateral amidst low Matic LST liquidity
- decreased WMATIC supply for Polygon v3

1. It is difficult to see immediate changes in WMATIC supply composition after a short duration and a relatively minor change, as you pointed out. **However, just because supply trends have not formed yet, does not mean that there is lower likelihood of them forming in the future.**

2. Thanks for pointing out the depositors of WMATIC are driven by potential yield, which is pretty common for any other token. They are also driven by the ability to borrow against their WMATIC collateral. We also agree that increased borrowing demand elevates supply APY for WMATIC. **However, supply APY at the kink for WMATIC, even with the current interest rate regime of slope1 = 6.1%, Uopt at 75%, RF at 20%, is 3.7%, which is lower than the APY for both STMATIC (4.3%) and MaticX (4.7%).**

3. The user that we have collectively noted replaced ~25m WMATIC collateral with stMATIC collateral against stablecoins. **This was 35% of the ~70m WMATIC** supplied in Polygon v3 at the time. Again, echoing from above, lack of trend today is not indicative of future behavior.  

4. We’ve continuously pointed out the low liquidity levels of Matic LSTs both in the original post as well as [here](https://governance.aave.com/t/arfc-supply-cap-increase-lsts-on-polygon-v3/14696/4). Based on our Matic LST liquidity data, as of now there are only ~1.4m WMATIC in pools against stMATIC on [Balancer](https://app.balancer.fi/#/polygon/pool/0xf0ad209e2e969eaaa8c882aac71f02d8a047d5c2000200000000000000000b49), when historically there were \> ~$20m TVL in [liquidity pools](https://app.balancer.fi/#/polygon/pool/0x216690738aac4aa0c4770253ca26a28f0115c595000000000000000000000b2c). A similar amount exists for MaticX as well.

 ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e5047ddbd81ed4eb7833f6f3763fa6a619770c98.png)

## Summary

- Gauntlet stands by these parameter recommendations given the analysis above.

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_[View the full topic](https://governance.aave.com/t/arfc-gauntlet-recommendation-to-lower-stmatic-maticx-non-emode-lt-pt-2/15314)._