While stMATIC shares similarities with MaticX as an LSD in terms of its calculated price feed, it is presently being utilized on Aave as collateral to borrow stablecoins rather than being leveraged for the underlying asset (MATIC).
Notably, four of the top five wallets utilizing stMATIC as collateral are borrowing USDC and USDT. For more information regarding these wallets, refer to the Chaos Labs Risk Monitoring Platform (wallet 1, wallet 2, wallet 3, wallet 4)
Therefore, in this case, the primary considerations in our risk analysis are liquidity and price volatility of the underlying asset, and not counterparty risk, which is what the community voted on this past weekend.
We do not recommend increasing the supply cap to more than 50% of the total circulating supply at this time.
As discussed in a separate thread, a potential solution that will allow more aggressive caps would be incorporating distinct supply caps for E-Mode categories.