Increase eUSDe supply cap on Euler Yield

Euler DAO Markets
1

Summary

This proposal seeks to increase the supply cap of the Euler Yield eUSDe vault from 5M to 10M. The supply cap was hit 3 days after the official announcement. We believe this increase will further stimulate borrows in Euler Yield and keep Euler competitive with Morpho.

Rationale

In a few days after listing, the eUSDe vault has hit its 5M supply cap on Euler. Ethereal TVL recently broke $500M (Dune). The implied yield on Pendle has settled at ~12%, indicating strong above-market interest in Ethereal’s points program. We believe eUSDe’s risk profile has not changed materially since the assessment by Gauntlet and Objective Labs earlier this month.

Points

Last week a representative of the Ethereal committed to enrolling Euler in Ethereal’s points program. This is now official on Ethereal’s dashboard, and we are happy that Euler is put on equal footing with Morpho. We believe this is a strong signal for the potential of the Euler Yield market to lead the market in eUSDe lending TVL.

Caps

Modified values in bold.

Vault Supply Cap Borrow Cap
eUSDe 5M → 10M 0

Author

Objective Labs is a service provider for Euler Labs tasked with product development, risk management, and incentive optimization. Objective Labs is Euler-aligned.

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Gauntlet is aligned with this increase of the initial supply cap for eUSDe from 5M to 10M. This asset’s supply cap usage reached 100% within days of being listed, and its TVL has increased by ~$150M since our original recommendation. The new supply cap will be ~1.9% of token supply. We are amenable to increasing the supply cap given the outsize demand, while noting primary atomic liquidity still only exists through redemptions with Ethereal.

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