We would like to clarify a few points regarding the proposed supply cap increase:
Firstly, we would like to highlight that the current circulating supply on Polygon is around 34M. Therefore, the proposed cap would represent 100% of Polygon circulating supply. Our methodology recommends not concentrating more than 50% of the circulating supply on Aave, which is why the current supply cap is set at 17M. This is necessary to limit Aave’s risk exposure to a single asset on a given deployment.
Secondly, we would like to clarify that the supply caps methodology is being used for the EMode LT of MaticX, which is not covered by this version of the methodology.
Lastly, we would like to point out that the 15% price drop being used is intended for market caps greater than $20B, while MaticX is currently at around $60M. The correct price drop for this case is 50%, but this does not change the outcome of our methodology when disregarding the total circulating supply limitation.
Given the above points, we believe it is important to wait for more liquidity to flow to Polygon before considering a significant (2x) increase in the supply cap.