Summary
A proposal to:
- Increase the supply and borrow cap of USDT0 on the Mantle Instance
- Increase the supply and borrow cap of USDC on the Mantle Instance
- Decrease the supply cap of syrupUSDT on the Mantle 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.
USDT0
USDT0 has reached its supply cap of 100 million tokens on the Mantle instance following an inflow of over 80 million in the past 24 hours.
Supply Distribution
The supply distribution of USDT0 is relatively concentrated, typical for incentivized markets that have been active for a limited duration, as the users compete for advantageous positioning. While the top supplier accounts for approximately 50% of current capacity, the supply side of the market poses no risk, as USDT0 is borrow-only.
Borrow Distribution
Borrow distribution is comparatively less concentrated: the top user accounts for 30% of the market, while the top 5 wallets account for 75%. As can be observed on the plot below, the majority of USDT0 debt is collateralized by syrupUSDT, as the assets share an underlying and are highly correlated, the liquidation risk in the market is currently minimal.
Recommendation
Given the strong lending demand for the asset and minimal liquidation risk, we recommend increasing the supply and borrow caps of USDT0 on the Mantle instance.
USDC
USDC has reached its supply cap of 10 million tokens, indicating substantial demand to lend the asset on Aave. While the asset’s borrowing utilization is currently 3.5%, external incentives offer a 20% APY on USDC deposits, incentivizing users to deploy USDC into the protocol.
Supply Distribution
The supply distribution of USDC exhibits a high level of concentration as the top 3 users represent over 75% of the market; nevertheless, given that USDC is configured as a borrow-only asset, no risk of liquidation can be assumed with respect to the supply side of the market.
Borrow Distribution
Cumulative borrowing of USDC currently stands at approximately 350 thousand tokens, representing a utilization rate of 3.5%. The borrow side of USDC presents extremely limited risk given the absolute size of the market.
Recommendation
While USDC currently exhibits low utilization, we expect the borrowing demand to increase in the near term. Additionally, to further grow the instance, we recommend increasing both the asset’s supply and borrowing caps.
syrupUSDT
Our previous recommendation for the initial listing of syrupUSDT proposed a supply cap of 70 million tokens. However, the liquidity commitment from the Maple team has not yet materialized, exposing the protocol to risks if liquidations on syrupUSDT-collateral USDT-debt positions were to occur. While such an event is unlikely given syrupUSDT’s oracle setup, the concentration of this asset within Aave warrants changes. Therefore, we recommend limiting the supply cap to current usage. This adjustment will temporarily pause the growing exposure of the instance to Maple’s syrupUSDT until the expected liquidity is committed without affecting existing positions.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Mantle | USDT0 | 100,000,000 | 200,000,000 | 95,000,000 | 190,000,000 |
| Mantle | USDC | 10,000,000 | 20,000,000 | 9,500,000 | 19,000,000 |
| Mantle | syrupUSDT | 70,000,000 | 57,000,000 | - | - |
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.