Overview
Following the successful Snapshot for this [TEMP-CHECK], we have conducted an analysis and provide risk parameter recommendations for the initial listing of KNC.
Liquidity and Market Cap
When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of KNC over the past 180 days was ~$110M, and the average daily trading volume was ~$19.3M (CeFi & DeFi).
Liquidation Threshold
Analyzing KNC price volatility over the past, we observed daily annualized volatility of 95.05% and 30-day annualized volatility of 89.47%. While we could propose a higher LT based on volatility considerations, we recommend a more conservative launch with a 40% LT due to the asset’s relatively low market cap.
We support listing KNC as borrowable under reasonable limits of supply and borrow caps, as we do not observe a significant risk to the protocol by allowing to borrow the asset.
Debt Ceiling
Following Chaos Labs’ Isolation Mode Methodology, we recommend an initial debt ceiling of $2.7M. Under the methodology for Isolation Mode, we consider two levels of probabilities for extreme price drops - Medium-High and High. We estimate the probability of an extreme price drop for KNC as High.
Supply Cap, Borrow Cap, and Liquidation Bonus
Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact. At current liquidity levels and a 10% Liquidation Bonus, this would yield a supply cap of 600K KNC.
Given the conservative nature of this approach and the already cautious LT setting, we propose a further increase in the initial supply cap by a factor of 2X. This adjustment results in a recommended supply cap of 1.2 million and a borrow cap of 650,000 KNC.
Recommendations
Following the above analysis and considering the recommendations above by @Gauntlet, we recommend the following parameters, taking the conservative recommendations from each analysis, if the community decides to list KNC:
| Parameter | Value |
|---|---|
| Isolation Mode | Yes |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap (KNC) | 1,200,000 |
| Borrow Cap (KNC) | 650,000 |
| Debt Ceiling | $1M |
| LTV | 35.00% |
| LT | 40.00% |
| Liquidation Bonus | 10.00% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 9.00% |
| Variable Slope2 | 300.00% |
| Uoptimal | 45.00% |
| Reserve Factor | 20.00% |
| Stable Borrowing | Disabled |
| Stable Slope1 | 13.00% |
| Stable Slope2 | 300.00% |
| Base Stable Rate Offset | 3.00% |
| Stable Rate Excess Offset | 5.00% |
| Optimal Stable To Total Debt Ratio | 20.00% |
| Flahloanable | Yes |
| Siloed Borrowing | No |
| Borrowed in Isolation | No |