Summary
A proposal to:
- Increase the supply and borrow caps of USDC on the Mantle Instance
- Increase the supply cap of wrsETH on the Mantle Instance
- Increase the supply cap of PT-srUSDe-2APR2026 on the Ethereum Core Instance
- Decrease UOptimal and Slope 1 for WETH on Ethereum Core 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.
USDC (Mantle)
USDC has reached its supply cap of 60 million on the Mantle instance. While utilization currently stands at 42%, the ongoing supply-side incentive campaign results in a supply rate of 4.03%.
Supply Distribution
USDC supply exhibits mild concentration, as the top position represents approximately 17% of the market. As USDC is configured as a borrow-only asset, no liquidation risk is present on the supply side of the USDC market.
Borrow Distribution
USDC borrow distribution is relatively more concentrated, with the top borrower accounting for approximately 28% of all debt, while top three users have a cumulative share of over 65%. The overwhelming majority of users are utilizing syrupUSDT or WETH collateralize USDC debt. Health factors align with expected behavior. Positions with correlated collateral and debt cluster near a 1.02 health factor, while WETH-collateralized positions are generally in the 1.18-1.66 range.
Recommendation
Considering the persistent demand to both supply and borrow USDC and observed user behavior, we recommend expanding the supply and borrow caps of the asset on the Mantle instance.
wrsETH (Mantle)
wrsETH has reached its supply cap of 48,000 tokens on the Mantle instance. Demand to use the asset as collateral is driven by participation in leveraged staking strategies and the ongoing supply-side incentives for wrsETH, which currently amount to 0.15%.
Supply Distribution
The wrsETH market shows significant concentration, with just 4 participants controlling the majority of supply. These participants utilize WETH loans backed by wrsETH holdings, capitalizing on the differential between wrsETH’s yield and WETH financing rates. Health scores hover near 1.02; due to the strong correlation between debt and collateral assets, the probability of liquidation events remains minimal.
Liquidity
wrsETH liquidity is concentrated in a wrsETH/WETH Merchant Moe pool with a TVL of approximately $2.3 million. The pool is balanced and consists of roughly equal shares of both assets.
Recommendation
Given the ongoing and persistent demand from users to utilize wrsETH as collateral in leveraged restaking strategies, combined with the limited liquidation risk observed in the market due to the strong correlation between collateral and debt assets, and considering the adequate on-chain liquidity available in the wrsETH/WETH pool, we recommend an increase of the supply cap of wrsETH on the Mantle instance.
PT-srUSDe-2APR2026
PT-srUSDe-2APR2026 has reached its supply cap of 100 million tokens following an inflow of 40 million since the start of March, indicating persistent demand to utilize the asset in leveraged looping strategies.
Supply Distribution
The supply of PT-srUSDe-2APR2026 is highly concentrated as the top user accounts for 40% of the total while top three users have a cumulative share of 68.2%. As can be observed on the plot below, the borrowing is highly correlated as the users’ debt is denominated primarily in USDe. The users are utilizing PT-srUSDe-2APR2026 as collateral to recursively borrow USDe, resulting in leveraged earnings from the rate differential.
As can be observed the majority of health factors are in the 1.02 range, which given the high price correlation of the asset and oracle configuration, minimizes the risk of liquidations. However there is one position 0x8b41…cdd7, which seems close to liquidation as its health score is ~1.00163, nevertheless the position looks highly managed and does not present the risk of bad debt for the protocol.
Market & Liquidity
The implied yield on PT-srUSDe-2APR2026 has increased by approximately 50 basis points over the past two weeks. With the PT currently yielding 4.78% against USDe borrowing costs of 2.24%, the net return on the looping strategy is substantial, suggesting further demand to supply PT-srUSDe-2APR2026 on Aave.
On-chain liquidity on the Pendle AMM currently exceeds $20 million, resulting in approximately 55 bps of slippage on a $15 million sell order.
Recommendation
Given the persistent supply demand, the strong yield incentive driving continued looping activity, and sufficient on-chain liquidity to support orderly liquidations if needed, we recommend doubling the supply cap of PT-srUSDe-2APR2026 on the Ethereum Core instance.
WETH (Ethereum Core)
In February, we have made a recommendation to temporarily raise UOptimal for WETH on Ethereum Core from 92% to 94% and Slope1 from 2.35% to 2.45% to provide short-term relief during a period of acute supply contraction driven by large position unwinds and sustained looping activity. That recommendation was explicitly conditional on prevailing market stress, with a stated intention to revert once conditions normalized.
Current WETH utilization stands at 88.69%, well below the temporarily elevated UOptimal of 94%, reflecting a meaningful reduction in borrow-side pressure. With market conditions having stabilized, we recommend reverting both parameters to their prior values, restoring the long-term rate profile consistent with the original configuration.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Mantle | wrsETH | 48,000 | 52,000 | - | - |
| Mantle | USDC | 60,000,000 | 80,000,000 | 57,000,000 | 76,000,000 |
| Ethereum Core | PT-srUSDe-2APR2026 | 100,000,000 | 200,000,000 | - | - |
| Instance | Asset | Current UOptimal | Recommended UOptimal | Current Slope 1 | Recommended Slope 1 |
|---|---|---|---|---|---|
| Ethereum Core | WETH | 94% | 92% | 2.45% | 2.35% |
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.