Summary
A proposal to:
- Increase the supply and borrow caps of USDT0 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 on the Mantle instance following an inflow of approximately 50 million tokens from a single user. The supply distribution of USDT0 is extremely concentrated as the market is effectively represented by one user who accounts for over 99.9% of the total supply; notably, the position is identified with Ethena. While such levels of concern typically imply a risk of liquidation or rate volatility, in the event the supplier withdraws, the long-term alignment of Ethena with Aave and the borrow-only configuration of USDT0 on Mantle effectively minimizes those risks.
Borrow Distribution
The borrower distribution of the asset also shows significant concentration, as the market consists of 7 users, two of whom account for over 80% of all USDT0 debt.
As shown in the plot below, borrowers are collateralizing USDT0 debt with syrupUSDT; such strategies are highly prevalent, as users earn a recursively levered spread between the underlying yield of the collateral and the borrowing costs of the debt. As the two assets are highly correlated and share the same underlying notional — USDT0, the risk of liquidation in the market is minimal.
Recommendation
Considering the configuration of the market and substantial USDT0 liquidity within the instance, we recommend increasing the supply and borrow caps of the asset on Mantle
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Mantle | USDT0 | 50,000,000 | 100,000,000 | 47,500,000 | 95,000,000 |
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.