Summary
A proposal to:
- Increase BTC.b’s supply cap on the Avalanche instance.
- Increase AVAX’s supply and borrow caps on the Avalanche instance.
BTC.b (Avalanche)
BTC.b’s supply cap utilization has reached 82%, while its borrow cap utilization stands at 6%.
Supply Distribution
The top BTC.b supplier holds approximately 17% of the total distribution, presenting a minor concentration risk. However, as this user maintains a strong health score and actively manages their position, it does not pose any significant concern at this time.
The remaining top suppliers have all maintained their health scores within a reasonable range and are actively managing their positions, significantly reducing the likelihood of liquidations.
The two largest borrowed assets against BTC.b are stablecoins, USDC and USDt, which together account for approximately 80% of the total distribution.
Borrow Distribution
The borrow distribution of BTC.b presents minimal liquidation risk, as all top borrowers either maintain a high health score or use BTC.b as collateral.
The largest collateral asset against BTC.b is WAVAX, accounting for 60% of the total distribution, followed by BTC.b itself, which represents 18.76% of the total distribution.
Liquidity
BTC.b’s liquidity has remained stable over the past three months, with a 35 BTC.b sell incurring less than 10% price slippage.
Recommendation
Given user behavior and on-chain liquidity, we support a supply cap increase. Additionally, anticipating a significant influx of BTC.b deposits, we recommend raising the supply cap to 6K.
WAVAX (Avalanche)
The supply cap utilization of WAVAX has reached 84%, while its borrow cap utilization stands at 63%.
Supply Distribution
The supply distribution of WAVAX is well-diversified, with the top supplier accounting for only 12% of the total distribution. Additionally, since this user has no borrowing activity, it does not pose any liquidation risk at this time.
The remaining top suppliers either maintain a high health score (>1.4) or have no borrowing activity, significantly reducing any immediate liquidation risks.
The largest borrowed assets against WAVAX are USDC and USDt, accounting for 73% of the total distribution.
Liquidity
AVAX’s liquidity has remained stable over the past three months, with a 140K AVAX sell currently incurring less than 5% price slippage.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing the supply cap to 10M and borrow cap to 7.2M.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Avalanche | BTC.b | 4,000 | 6,000 | 900 | - |
| Avalanche | WAVAX | 5,700,000 | 10,000,000 | 3,600,000 | 7,200,000 |
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 ARFC.
Copyright
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