Summary
A proposal to:
- Increase cbBTC’s supply cap on the Ethereum Core instance.
- Increase USDC.e’s supply cap on the Sonic 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 supply on Ethereum Core instance has been increasing steadily, resulting in a supply utilization rate of 99%, while the borrow cap utilization has been hovering in the 50-60% range.
Supply Distribution
cbBTC supply is somewhat concentrated, with the top three suppliers collectively holding over 55% of the total supply. However, they maintain their positions with moderately high health factors.
The largest borrowed asset against cbBTC is USDT, accounting for 33% of the total distribution.
Liquidity
cbBTC’s on-chain liquidity has increased over the past three months and remains sufficient, with a current sell of 420 cbBTC (valued at $42 million) resulting in less than 5% price slippage.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing cbBTC’s supply cap.
USDC.e (Sonic)
USDC.e’s supply utilization rate has reached 79% on Sonic, while the borrow cap utilization rate stands at 30%.
Supply Distribution
USDC.e carries minimal concentration risk, as the largest supplier holds just 21% of the total supply. Additionally, nearly all top suppliers have no active borrow positions, significantly reducing immediate liquidation risk.
There is only $44 million in borrowing activity against USDC.e collateralized debt, which is low compared to the total supply of the asset. More than 50% of this borrowing activity is for WETH, totaling $24.5 million.
Liquidity
USDC.e’s liquidity has been generally stable over the past three months, though it remains somewhat limited. However, given the current user behavior, we do not anticipate that a supply cap increase would introduce significant risk.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing USDC.e’s supply cap.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | cbBTC | 20,000 | 24,000 | - | - |
| Sonic | USDC.e | 470,000,000 | 560,000,000 | - | - |
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