Summary
A proposal to
- Increase the supply cap of USDtb on the Ethereum Core instance
- Increase the supply cap of cbBTC 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.
USDtb
USDtb has reached its supply cap of 200 million tokens, following an inflow of approximately 100 million tokens in the past three days. Such dynamics signal a substantial increase in demand for lending the asset on the Ethereum Core instance.
Supply Distribution
The supply distribution of USDtb is highly concentrated, as the top user effectively represents the entire market. While such levels of concentration are typically risky, the wallet is directly associated with Ethena, which has been long-term aligned with Aave, thereby substantially reducing the risk of rapid supply contraction. Additionally, USDtb is a borrow-only asset with no collateral utility; hence, the supply side of the market cannot assume any liquidation or bad debt risks.
Borrow Distribution
The borrower distribution exhibits moderate concentration, with the top user accounting for less than 20% of the market and the top ten users accounting for roughly 67% of the total. The distribution of health factors is relatively healthy given the collateral composition, which consists primarily of stablecoins and their derivatives like sUSDe and PT-sUSDe-5FEB2026.
As mentioned previously, USDtb debt is primarily collateralized by Ethena-associated stablecoin-like assets such as staked USDe, PT-sUSDe, and USDe, which account for roughly 55% of all collateral. Given the high degree of correlation between USDtb and the primary collateral assets, the risk of liquidations in the market is minimal.
Liquidity
According to DEX aggregator estimates, the slippage on a 10 million sUSDe-to-USDtb swap is currently priced at 38 basis points, suggesting a low probability of bad debt from failed or unprofitable liquidations on the collateral side. While USDtb’s liquidity profile has exhibited a slight compression recently, the depth available is sufficient to expand the supply and borrow caps.
Recommendation
Considering the expanded demand for lending USDtb on Aave, along with the asset’s borrow-only utility and highly correlated borrowing, we recommend raising the supply and borrow caps of USDtb on the Ethereum Core instance.
cbBTC
cbBTC has reached approximately 92% of its supply cap at 22,150 tokens, which is currently valued at roughly $2.1 billion. The supply has expanded significantly over the last 90 days, with an inflow of approximately 7,000 tokens.
Supply Distribution
The supply distribution exhibits moderate concentration with the top wallet accounting for 16% of the total, while the top thirty-three users have a cumulative share of 68%. As can be observed, borrowing against cbBTC is relatively conservative, as the health factors tend to cluster primarily in the conservative 1.71 - 2.36 range.
Additionally, cbBTC is used predominantly to underwrite stablecoin debt, specifically USDC, RLUSD, USDT, and PYUSD, which represent approximately 92% of all debt posted.
Liquidity
At the time of writing, a sell order of 1000 cbBTC for USDC is limited at 5% slippage, which, considering its liquidation bonus, presents a significant buffer for potential liquidations. Additionally, the asset’s liquidity profile has exhibited stable price impact levels over the past five months, further confirming the reliability of the DEX exit venues.
Recommendation
Given the growing supply of cbBTC, the conservative user behavior dynamics, and the strong liquidity profile of the asset, we recommend increasing the supply cap of cbBTC on the Ethereum Core instance.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | USDtb | 200,000,000 | 300,000,000 | 160,000,000 | 240,000,000 |
| Ethereum Core | cbBTC | 24,000 | 28,000 | 1,440 | - |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
Chaos Labs has not been compensated by any third party for publishing this AGRS recommendation.
Copyright
Copyright and related rights waived via CC0.