Summary
A proposal to:
- Increase rsETH’s supply cap on the Arbitrum instance
- Increase FBTC’s supply cap on the Ethereum Core instance
- Increase PT-USDe supply cap on the Ethereum Core 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.
rsETH (Arbitrum)
rsETH reached 100% supply cap utilization.
Supply Distribution
The supply of rsETH is highly concentrated, with the top supplier accounting for over 99% of the total, which introduces a concentration risk.
However, given that the user is borrowing wstETH, a highly correlated asset, and maintains a reasonable health score at 1.27, immediate liquidation risk exposure is significantly reduced.
Liquidity
Although rsETH liquidity on Arbitrum declined from April to early June, it has stabilized at a level that limits slippage to roughly 2% on a 100 rsETH sell order. In a forced-liquidation scenario, this depth would still be too shallow to facilitate efficient liquidations. Still, the associated risk is minimal because the collateral and debt assets are highly correlated.
FBTC (Ethereum Core)
FBTC on Ethereum Core has reached max supply at 400 FBTC.
While total supply has crossed $40M the borrowing has been growing very conservatively, with the utilization at 0.01%
Supply Distribution
The supply of FBTC presents moderate concentration risk, with the top supplier accounting for over 60%. The suppliers are maintaining relatively high health scores ranging from 1.26 to 1.49, limiting liquidation risk.
The suppliers borrow mostly stablecoins (USDT, RLUSD) and WETH against the collateral, posing limited liquidation risks, additionally the top supplier is using $15M RLUSD to further collateralize his USDT debt.
Liquidity
Available liquidity for FBTC/WBTC is sufficient for a moderate cap increase, currently a combination uniswap pools can facilitate a sell order of 150 FBTC with a conservative 2.5% slippage.
PT-USDe (Ethereum Core)
PT-USDe-31JUL2025 had reached its supply cap at $180M on June 17th.
Supply Distribution
As covered in previous risk recommendations. PT-USDe collateral is mostly used to borrow stablecoins either with the USDe E-Mode or Stablecoin E-Mode, in order to further deposit them into Pendle and continue looping. The supply concentration is moderately high with the top 3 suppliers accounting for ~73% of the total.
All of the collateral is used to borrow highly correlated assets with 45% USDe ($73M) and the rest being split between USDT ($82M), USDC ($3 M), USDS ($1.5M). The relative increase in usage of USDe since the middle of June can be attributed to the USDe E-Mode which in comparison to the Stablecoin E-Mode offers significantly more capital efficiency, due to looser risk parameters.
Liquidity
Although liquidity is currently insufficient to liquidate the outstanding supply, the market’s structure mitigates some of the associated risks. As PT-USDe naturally converges toward its underlying (USDe) with maturity, the notional that would have to be sold in case of a liquidation gradually declines, significantly limiting liquidation risk as the PTs approach maturity.
The PT-USDe-30JUL2025 market has also maintained a stable APY in the 7% - 8% range.
Recommendation
Based on the observed user behavior and current on-chain liquidity conditions, we recommend raising the supply cap for rsETH on the Arbitrum instance and PT-USDe, FBTC on Ethereum Core.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Arbitrum | rsETH | 3,960 | 7920 | - | - |
| Ethereum Core | FBTC | 400 | 600 | 100 | - |
| Ethereum Core | PT-USDe | 180,000,000 | 200,000,000 | - | - |
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 recommendation.
Copyright
Copyright and related rights waived via CC0