Summary
A proposal to:
- Increase supply cap for PT-USDe-27NOV2025 on the Ethereum Core instance.
- Increase supply cap for SCR on the Scroll 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.
Our recent research paper, “Stress Testing Ethena: A Quantitative Look at Protocol Stability,” examines how rapidly growing deposits of Ethena’s USDe, sUSDe and especially Pendle Principal Tokens are reshaping Aave’s collateral pool and funding dynamics. It maps out both on‑chain liquidity hazards (e.g., thin PT markets, leveraged looping, rehypothecation) and backing‑side tail risks (exchange or custodian failure, collateral de‑peg, prolonged negative funding) via scenario modeling and Monte‑Carlo simulations, while proving that Aave’s current risk‑oracle floors, eMode parameterization and liquidation controls would absorb most plausible shocks. The proposed cap increases reflect and incorporate the insights from this paper.
Finally, our most recent paper, “Aave’s Growing Exposure to Ethena: Risk Implications Throughout the Growth and Contraction Cycles of USDe ,” shows that contraction and stabilization dynamics within the Aave-Ethena ecosystem are closely linked. When sUSDe yields decline, leveraged positions unwind, freeing up significant stablecoin liquidity in Aave through repayments. Simultaneously, PT/USDe borrowers shift their debt into other stablecoins, generating upward price pressure on USDe precisely when redemption demand rises. Crucially, stablecoin repayments from leverage unwinders typically outweigh PT debt migration into stablecoins, creating a natural liquidity buffer. Our analysis indicates this dynamic effectively stabilizes Aave markets, comfortably absorbing potential stress even during Ethena’s withdrawal of backing assets. Overall, the current market structure supports increased exposure, provided backing deployment into Aave remains prudently managed. The proposed cap increases reflect and incorporate the insights from the aforementioned papers.
For more insight into how the PT Risk Oracle operates, please consult the following post and its follow up. In addition, the Risk Oracles outputs can be monitored live at the following page.
PT-USDe-27NOV2025 (Ethereum Core)
PT-USDe-27NOV2025 has reached its full supply cap of 50M, which was fully utilized shortly after onboarding, indicating strong market demand.
Supply Distribution
The supply distribution of PT-USDe presents a moderate concentration risk, with the top supplier accounting for around 30% of the total supply. However, we do not view this position as presenting any material risk, as it is primarily borrowing USDT. This behavior of borrowing a correlated asset significantly reduces the likelihood of liquidation.
The remaining top suppliers are also borrowing USDe, USDT, or USDC, which reduces the likelihood of liquidation.
At present, USDT and USDe account for 99% of the total borrowed asset distribution. Given the high correlation between debt and collateral prices, liquidation risk remains minimal.
Liquidity and Market
Liquidity in the Pendle AMM currently supports swaps of up to $4M with less than 3% slippage.
The implied yield has remained stable over the past week, fluctuating within a narrow range of 9% to 10%.
Recommendation
In light of strong user demand, safe user behavior, and a stable implied yield, we recommend increasing the supply cap for PT-USDe-27NOV2025.
SCR (Scroll)
SCR has reached 93% supply cap utilization and 100% borrow cap utilization.
Supply Distribution
The supply distribution of SCR presents a moderate concentration risk, with the top supplier accounting for around 42% of the total. However, since SCR is a debt-only asset with a relatively limited borrow cap, even an instant withdrawal by this top supplier would not cause a utilization spike that could negatively impact borrowers.
Borrow Distribution
The borrow distribution of SCR indicates limited liquidation risk, as all top borrowers maintain high health scores, with the lowest at 1.3, substantially reducing the likelihood of liquidation. In addition, the total borrowed amount of SCR remains relatively limited, currently under $10K.
The largest collateral asset backing SCR is USDC, which accounts for 86% of the total collateral distribution.
Recommendation
Given the safe user behavior, we recommend increasing SCR’s supply caps.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | PT-USDe-27NOV2025 | 50,000,000 | 100,000,000 | - | - |
| Scroll | SCR | 750,000 | 1,500,000 | 28,000 | - |
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.