Summary
A proposal to:
- Increase the supply cap of syrupUSDT on the Plasma instance
All cap 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.
syrupUSDT (Plasma)
syrupUSDT has reached its supply cap at 150 million tokens. The cap was filled almost instantly after the initial listing approximately 7 days ago, indicating substantial demand to loop this yield-bearing asset on Plasma. The parameters proposed further were achieved in close collaboration with the Plasma team, aiming to optimize collateral distribution, asset utilization, and enhance user retention.
Supply Distribution
The supply of syrupUSDT is highly concentrated, with the top user holding over 95% of the total. The distribution is likely this highly concentrated due to the constraints posed by the supply cap; while the top user has entered swiftly, limited room remained for other smaller-volume suppliers. We also observe that the health factors are tightly clustered in the 1.05-1.15 range, considering the level of price correlation of the assets, such health factors present minimal risk.
Users primarily supply syrupUSDT to borrow USDT0, which is facilitated by a highly capital-efficient E-Mode configuration. Users are earning substantial net yields by leveraging the spread between the underlying yield of syrupUSDT and the borrow rate of USDT0, explaining the strong demand for the asset. The high correlation between debt and collateral assets, which share the same underlying base, effectively minimizes liquidation risk.
Liquidity
Currently, the majority of syrupUSDT liquidity is concentrated on the Fluid DEX, which can facilitate a 10 million swap at a very conservative 0.1% slippage, supporting an expansion of the supply cap.
Recommendation
Considering the persistent demand to collateralize correlated debt positions with syrupUSDT, safe user behavior, and substantial on-chain liquidity, we recommend increasing the supply cap of syrupUSDT on the Plasma instance.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap |
|---|---|---|---|
| Plasma | syrupUSDT | 150,000,000 | 300,000,000 |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
Chaos Labs has not been compensated by any third party for publishing this AGRS recommendation.
Copyright
Copyright and related rights waived via CC0.