Summary
A proposal to:
- Increase USDtb supply cap on the Ethereum instance.
- Increase rsETH supply cap on the Arbitrum 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.
USDtb (Ethereum)
USDtb has reached 100% supply cap utilization while its borrow utilization is currently at 26% and the overall utilization is at 20%.
Supply Distribution
The supply of USDtb is extremely concentrated, with the top position currently accounting for over 99% of the total supply. Using Arkham, we can identify this address as Ethena’s Coinbase Prime Custody, which currently holds over $1.3B of USDtb (approximately 90% of the total USDtb supply).
While this level of concentration can initially appear as a risk, the supplier address seems to serve as a reserve, as it frequently receives inflows from Ethena’s custody infrastructure, and given the impossibility to use USDtb as collateral, it does not pose any liquidation risk.
Liquidity
USDtb on-chain liquidity remains stable; however, it is concentrated on curve.finance with a pool size of $20M. As of now a sell order for 9.5M of USDtb would cause a 2-3% slippage.
rsETH (Arbitrum)
Recently, rsETH has reached its supply cap at 900 tokens, following its listing.
Supply and Borrow Distribution
The supply of rsETH is concentrated within one wallet, accounting for over 90% of the total supply. Given the high correlation between the user’s collateral and debt asset, the top position does not pose a significant liquidation risk.
As expected, given that wstETH is the only asset meaningfully borrowable against rsETH collateral, it represents 100% of the debt assets.
Liquidity
Liquidity for rsETH /wstETH pair has been decreasing over time, while still being relatively strong with a capacity to liquidate 10% of the total rsETH supply currently deposited into Aave at <3% slippage.
Recommendation
Given the minimal risks posed by a non-collateral assets supply, we support a supply cap increase of 50,000,000 USDtb. This change will allow for the expansion of supply, which in turn will lower the utilization and facilitate further interest rate discovery.
Additionally, we recommend increasing the supply cap of rsETH by 900 rsETH, due to the low risk associated with the utilized wstETH E-Mode. We also note that any subsequent supply-cap increases will be contingent on a corresponding rise in on-chain liquidity.
Specification
Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
---|---|---|---|---|---|
Ethereum | USDtb | 50,000,000 | 100,000,000 | - | - |
Arbitrum | rsETH | 900 | 1800 | - | - |
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 AGRS recommendation.
Copyright
Copyright and related rights waived via CC0