Summary
A proposal to:
- Increase USDe’s supply cap and debt ceiling on the Ethereum Core instance.
- Increase cbBTC’s supply cap on the Ethereum Core instance.
- Increase eBTC’s supply cap on the Ethereum Core instance.
- Increase wrsETH’s supply cap on the Base instance.
- Increase USDT’s supply cap on the BNB instance.
- Increase USDC.e’s supply cap on the Sonic instance.
All increases are backed by Chaos Labs’ risk simulations, which consider user behavior, on-chain liquidity, and price impact, ensuring that higher caps do not introduce additional risk to the platform.
USDe (Ethereum Core)
USDe’s supply cap utilization has reached 90%, and its borrow cap utilization stands at 37%.
Supply Distribution
The supply of USDe is concentrated, with the top supplier contributing $229M, representing 53% of the total distribution. However, as this user maintains a strong health score of 3.08 and is borrowing USDT, the risk of immediate liquidation appears minimal.
The remaining top suppliers either do not engage in borrowing or are borrowing stablecoins, presenting no material concerns at this time.
The largest borrowed asset against USDe is USDT, accounting for approximately 80% of the total borrowed distribution.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 960M USDe. Outstanding exposure to sUSDe has nominally decreased over the last few months due to dwindling yield and an associated shift in incentive structure to compensate for this, hence the increased observed demand. Alongside, we recommend increasing the debt ceiling accordingly to 86.4M.
cbBTC (Ethereum Core)
cbBTC’s supply cap utilization has reached 100%, and its borrow cap utilization stands at 39%.
Supply Distribution
The supply of cbBTC is well-distributed, with the top supplier holding just 17% of the total. All top suppliers maintain strong health scores (>1.3), significantly mitigating liquidation risk.
The largest borrowed assets against cbBTC are USDC, WETH, and USDT, which collectively account for 93% of the total borrowed distribution.
Liquidity
cbBTC’s liquidity has shown fluctuations, with a current 210 cbBTC sale incurring less than 7.5% price slippage. While this liquidity is relatively limited compared to the total supply, we do not believe it poses a significant risk at this time given observed user behavior. Nonetheless, we will take this into account and recommend a conservative increase to the supply cap.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 18K cbBTC.
eBTC (Ethereum Core)
eBTC’s supply cap utilization has reached 100%.
Supply Distribution
The supply distribution of eBTC is somewhat concentrated, with the top supplier holding 35% of the total. However, as this user maintains a health score of 1.65 and actively manages their position, we do not view this as a significant concern at this time.
The remaining top suppliers either maintain strong health scores or are borrowing against WBTC, which significantly reduces liquidation risk.
The largest borrowed asset against eBTC is USDC, followed by WBTC.
Liquidity
eBTC’s liquidity has remained limited in recent months, with a 100 eBTC sale currently incurring less slippage than the liquidation bonus. While we do not view this as a limiting concern based on observed user behavior, we consider it when recommending an associated supply cap increase.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 1100 eBTC.
wrsETH (Base)
wrsETH’s supply cap utilization has reached 100%.
Supply Distribution
wrsETH’s supply distribution presents a concentration risk, with the top supplier currently holding 66% of the total supply. However, as this user has no active borrowing activity, it poses no immediate liquidation risk.
The remaining top suppliers are either engaged in looping strategies or have no borrowing activity, presenting limited liquidation risk at this time.
The largest borrowed asset against wrsETH is wstETH, which accounts for 99.99% of the total borrowed distribution.
Liquidity
wrsETH’s liquidity has remained stable over the past three months, supporting a supply cap increase.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 1.2K.
USDT (BNB)
USDT’s supply cap utilization has reached 96%, while its borrow cap utilization stands at 64%.
Supply Distribution
The supply of USDT presents no immediate liquidation risk, as all top suppliers currently have no borrowing activity.
Liquidity
USDT’s liquidity has remained stable over the past three months, currently allowing a 25M USDT sale with less than 1% price slippage, supporting a supply cap increase.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 100M.
USDC.e (Sonic)
USDC.e’s supply cap utilization has reached 91%, while its borrow cap utilization stands at 53%.
Supply Distribution
USDC.e presents minimal concentration risk, with the top supplier holding only 16% of the total distribution. Aside from three positions, all top suppliers are either engaged in looping strategies or have no borrowing activity, effectively minimizing immediate liquidation risk.
The remaining three top suppliers have borrowed WETH, each maintaining a healthy health score and actively managing their positions. As such, there are no immediate concerns at this time.
Liquidity
USDC.e’s liquidity has remained generally stable over the past three months, with a current 5M USDC.e sale incurring less than 5% price slippage. While this level of liquidity is relatively limited, based on observed user behavior, we do not believe a supply cap increase poses significant concern. That said, we will factor this into our assessment and recommend a conservative increase at this time.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 470M.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap |
|---|---|---|---|
| Ethereum Core | USDe | 480,000,000 | 960,000,000 |
| Ethereum Core | cbBTC | 16,400 | 18,000 |
| Ethereum Core | eBTC | 860 | 1,100 |
| Base | wrsETH | 600 | 1,200 |
| BNB | USDT | 50,000,000 | 100,000,000 |
| Sonic | USDC.e | 430,000,000 | 470,000,000 |
| Instance | Asset | Current Debt Ceiling | Recommended Debt Ceiling |
|---|---|---|---|
| Ethereum Core | USDe | 72,000,000 | 86,400,000 |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this AGRS recommendation.
Copyright
Copyright and related rights waived via CC0