Overview
Following the successful Snapshot for this [TEMP-CHECK], we have conducted an analysis and provide risk parameter recommendations for the initial listing of STG.
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 STG over the past 180 days was ~$120M, and the average daily trading volume was ~$20M (CeFi & DeFi).
Liquidation Threshold
Analyzing STG price volatility over the past, we observed daily annualized volatility of 102.47% and 30-day annualized volatility of 46.09%. 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 STG as borrowable under reasonable limits of supply cap, 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 $3M. 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 STG as High. Given this debt ceiling, we do not identify a profitable attack vector under the current liquidity levels.
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.
Given the concentrated liquidity of STG we recommend a 10% Liquidation Bonus and support the supply cap of 10,000,000 STG, in the original post. We recommend setting the initial borrow cap at 5.5M STG.
Recommendations
Following the above analysis, we recommend the following parameters:
| Parameter | Value |
|---|---|
| Isolation Mode | Yes |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap (STG) | 10,000,000 |
| Borrow Cap (STG) | 5,500,000 |
| Debt Ceiling | $3M |
| LTV | 35.00% |
| LT | 40.00% |
| Liquidation Bonus | 10.00% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 7.00% |
| 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 |
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