Current risk conditions
- Current CRV price is 0.598. The Aave v2 oracle for CRV is CRV / ETH | Chainlink - with a deviation of 2% and a heartbeat of 24 hours.
- Effective liquidation price for 0x7a16ff8270133f063aab6c9977183d9e72835428 is 0.368
- 267.4m CRV, 54.2m USDT borrowed for HF of 1.64
- CEX liquidity levels continue to show $1m+ within -2% of depth
- DEX liquidity levels show ~$70000 within -2% of depth
- The account has repaid ~37m CRV, 9m USDT on Aave v2 since yesterday
- The account has begun to reduce other CRV exposure outside Aave
- These positions continue to add risk to Aave
Recommendations
- We continue to recommend setting CRV LTV → 0 to impede further stablecoin borrowing
- We recommend freezing CRV to prevent further buildup of CRV position.
Additional USDT borrow and continued buildup of CRV position adds increased risk, as we have analyzed here - Gauntlet recommendation to freeze CRV and set CRV LTV -> 0 on Aave v2 - #41 by Gauntlet
On lowering CRV LT on v2
- We do not recommend lowering LT, as this would increase the effective liquidation price. Due to deteriorated liquidity conditions, the chance of cascading liquidations increases during high volatility.
On disabling CRV borrowing on v3 Ethereum and Polygon
- We put out a post to lower borrow caps for v3 Ethereum here previously. We would suggest moving forward with a separate AIP for this recommendation.
Immediate Next Steps:
We welcome community discussion and feedback for the next couple of hours. Only if there is agreement will we propose a single recommendation AIP to set CRV LTV → 0 on v2 Ethereum.
Additional levers considered:
- Reduce borrow cap on v3 to reduce short potential (we already proposed this in forums)
- Stop stablecoin borrowing (extreme)
- Raise stablecoin borrowing rates (too extreme and not necessarily useful)
- Toggle liquidation bonus. The counterfactual situations are very murky to get an accurate reading on this
- The tradeoff is position removal vs speed towards insolvency in the event of liquidations, depending on stabilized CRV price that will facilitate increased liquidation volume.
- Upwards - intent is to incentivize more liquidations, but tradeoff is increasing downwards pressure on CRV price during CRV depreciation past liquidation point (more impact during low liquidity) + higher insolvency price point, which leads to faster realized insolvencies if CRV price stabilizes at too low of a point
- Downwards - reverse of the above. Tradeoff is that liquidation volume may be lower, should price stabilize above effective insolvency point
Disclaimer
Gauntlet has not been compensated by any third party for publishing this ARFC.
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