Summary
A proposal to:
- Increase cbBTC’s supply 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.
cbBTC (Ethereum-Core)
cbBTC has reached 85% of its supply cap utilization, while its borrow cap utilization stands at 67%.
Supply Distribution
The supply distribution of cbBTC presents a minor concentration risk, with the top supplier accounting for 22% of the total. However, this user currently maintains a health score of 1.82 and is actively managing the position, so we do not view this as a significant concern.
The remaining top suppliers do not present any immediate liquidation risk, as they all maintain relatively high health scores (> 1.3), with the exception of one position. This position currently holds a health score of 1.05, but we do not consider it a concern, given its size, on-chain liquidity would be sufficient to absorb the selling pressure in the event of liquidation.
The top borrowed asset against cbBTC is USDC, which accounts for 33% of the total borrowed asset distribution.
Liquidity
cbBTC’s liquidity has remained stable over the past three months and has recently shown a growth trend. Currently, a 300 cbBTC sell would incur less than 3% price slippage. However, as this liquidity remains relatively limited compared to the total supply, we will take it into account and propose a conservative cap increase.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing cbBTC’s supply cap.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | cbBTC | 18,000 | 20,000 | 1,440 | - |
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