Summary
A proposal to:
- Increase the supply cap of PT-sUSDE-27NOV2025 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.
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-sUSDE-27NOV2025 (Ethereum Core)
PT-sUSDE-27NOV2025 has reached its supply cap at 150 million tokens, following an inflow of 75 million tokens since September 8th.
Supply Distribution
The supply distribution of PT-sUSDE-27NOV2025 is highly concentrated, with the top supplier accounting for approximately 35% of the total. Nevertheless, as the user is borrowing stablecoins (USDE, USDT), the risk of liquidation is minimal due to the high correlation of the debt and collateral assets. Additionally, the health factors for top suppliers are concentrated in a narrow 1.02-1.20 range, which is typical for leveraged looping strategies.
PT-sUSDE-27NOV2025 is used exclusively to borrow stablecoins, primarily USDT and USDE, as borrowing is facilitated by the PT-sUSDE-27NOV2025 Stablecoins and USDE E-modes, respectively. Due to the high correlation between the price of PT and that of stablecoins, liquidation risk remains minimal.
Liquidity and Market
Pendle’s AMM liquidity for PT-sUSDE-27NOV2025 has slightly increased. At the moment, the pool’s depth is sufficient to limit slippage on a 35 million swap to 2%.
PT-sUSDE-27NOV2025’s SY liquidity in the AMM has also increased since our last review, reaching $47 million.
Notably, Pendle’s orderbook has over 26 million in liquidity at or above 10% implied yield, creating an additional liquidity buffer.
The implied yield has been fairly stable over the past week, oscillating between 8.75% and 9.25%, resulting in minimal PT-price volatility.
Recommendation
Given the persistent user demand, safe user behavior, significant liquidity growth, and stable implied yield, we recommend doubling PT-sUSDE-27NOV2025’s supply cap to 300,000,000 tokens.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Ethereum Core | PT-sUSDE-27NOV2025 | 150,000,000 | 300,000,000 | - | - |
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.