Summary
A proposal to:
- Increase wS’s borrow cap on the Sonic instance.
- Increase WBNB’s supply cap on the BNB instance.
- Increase USDT’s borrow cap on the BNB instance.
- Increase PT-sUSDE-31JUL2025’s supply cap on the Ethereum Core instance.
- Increase PT-eUSDE-29MAY2025’s supply cap on the Ethereum Core instance.
- Increase USDe’s borrow cap on the Ethereum Core instance.
All 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.
wS (Sonic)
Given a growing demand for stS/ws looping, wS has reached 97% of its borrow cap utilization while its supply cap remains at 79% utilization.
Borrow Distribution
The biggest wS borrow position is collateralized by stS, hence looping over the stS staking rate. Thanks to the high correlation of the two assets, the position presents minimal liquidation risk. While uncorrelated assets collateralize the following top positions, their health score remain high, minimizing the liquidation risk.
The largest collateral asset against wS remains stS, accounting for 63% of the total distribution; however, thanks to recently opened positions stS now represents 23% of the collateral used.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing wS’s borrow cap.
WBNB (BNB)
WBNB has reached 100% of its supply cap utilization and 23% of its borrow cap.
Supply Distribution
The WBNB distribution presents limited liquidation risk, as all top suppliers maintain very healthy positions while borrowing stablecoins against their WBNB collateral.
The largest borrowed asset against WBNB is USDT, accounting for 88% of the total distribution, which aligns with our analysis above.
Liquidity
WBNB’s liquidity has remained stable over the past three months, with a current 20K WBNB sell incurring less than 5% price slippage.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing WBNB’s supply cap.
USDT (BNB)
WBNB has reached 81% of its borrow cap utilization while its supply cap remains at 56% utilization.
Borrow Distribution
While the USDT borrow distribution is fairly concentrated, the top wallets, making up 27% of the borrowed asset, are the same positions previously covered on WBNB, and they maintain a high health score, significantly reducing liquidation risk.
The majority of the other top borrow positions use BTC asset collateral and maintain similarly high health scores over 1.20.
BTCB and WBNB represent 86% of the collateral against USDT borrow combined, aligning with our analysis above.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing USDT’s borrow cap, aligning it with its UOptimal value.
PT-sUSDE-31JUL2025 (Ethereum Core)
PT-sUSDE-31JUL2025 has once again reached full supply cap utilization just three days after the most recent adjustment, and we anticipate continued strong demand for the asset in the coming days.
Supply Distribution
This asset is fairly concentrated, with a single position accounting for 35% of the total supply, equivalent to $83M. However, given that the position is borrowing USDC and USDT—both highly correlated with PT-sUSDE—the risk of liquidation is significantly reduced.
The remaining top positions are also borrowing USDT and USDC, which significantly reduces the risk of liquidations.
Liquidity & Market
Backed by on-chain liquidity in the Pendle AMM, the PT-sUSDE-31JUL2025 market currently supports swaps of up to 40M sUSDe with under 3% slippage.
The PT-sUSDE market has shown a consistent growth in yield over the past week, reaching 8.9%.
Recommendation
Given safe user behavior, the market’s liquidity, and the high demand for the asset, we recommend increasing the supply cap by 100M PT-sUSDE-31JUL2025. The supply cap increase was quantified in order to minimize the price impact and yield rate volatility caused by looping demand, while maintaining the asset’s supply cap close to the floating supply of the asset.
PT-eUSDE-29MAY2025 (Ethereum Core)
PT-eUSDE-29MAY2025 has once again reached full supply cap utilization, and we anticipate continued strong demand for the asset in the days ahead.
Supply Distribution
The asset’s distribution is moderately concentrated, with the top supplier accounting for approximately 17% of the total. However, this position does not pose significant concern at this time, as it is borrowing USDT, which is highly correlated with PT-eUSDE.
The remaining suppliers also do not present significant risk, as they are borrowing USDT and USDC—assets that are highly correlated with PT-eUSDE—thereby substantially reducing liquidation risk.
Currently, 81% of PT-collateralized debt is denominated in USDT, which significantly reduces the risk of large-scale liquidations.
Liquidity & Market
Backed by on-chain liquidity in the Pendle AMM, the PT-eUSDE-29MAY2025 market currently supports swaps of up to 175M with under 3% slippage.
The PT-eUSDe market saw an approximate 2% price increase over the past week, consistent with expected convergence toward maturity. This movement reflects normal price normalization rather than volatility, as PTs in their final phase realize remaining yield more rapidly, leading to brief but predictable price adjustments.
Recommendation
Given safe user behavior, the market’s liquidity, and the high demand for the asset, we recommend increasing the supply cap by 150M PT-eUSDE-29MAY2025. The supply cap increase was quantified in order to minimize the price impact and yield rate volatility caused by looping demand, while maintaining the asset’s supply cap close to the floating supply of the asset.
USDe (Ethereum Core)
USDe’s borrow cap utilization has reached 100%, while its supply cap utilization stands at 41%.
Borrow Distribution
USDe’s borrow distribution presents limited liquidation risk, as 7 of the top 10 borrowers are collateralizing USDS. The remaining three borrowers also maintain high health scores(>1.4), which further reduces the likelihood of liquidation.
The largest collateral asset against USDe is USDS, accounting for 55% of the total distribution, consistent with the analysis above.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing USDe’s borrow cap.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | PT-sUSDE-31JUL2025 | 240,000,000 | 340,000,000 | - | - |
| Ethereum Core | PT-eUSDE-29MAY2025 | 400,000,000 | 550,000,000 | - | - |
| Ethereum Core | USDe | 960,000,000 | - | 110,000,000 | 220,000,000 |
| Sonic | wS | 192,000,000 | - | 50,000,000 | 100,000,000 |
| BNB | USDT | 100,000,000 | - | 45,000,000 | 90,000,000 |
| BNB | WBNB | 72,000 | 144,000 | 36,000 | - |
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
Copyright and related rights waived via CC0