Gauntlet has reviewed the proposal from Objective Labs, comments below:
- USDC cap increase is low risk.
- PT-cUSDO remains relatively low risk. Top 10 collateral positions are against USDC debt with sufficiently high average health and the major DEX pool’s liquidity has increased to 40M since the previous cap increase.
- eUSDe cap increase is relatively low risk. USDe atomic liquidity has markedly increased on-chain, with ~50M swap to stablecoin incurring at most ~20% slippage, versus <= ~40M the previous month.
- mMEV cap decrease is aligned with recent analysis to reduce exposure.
- Recent borrowing usage of stablecoins has caused sharp temporary utilization spikes, leading to highly volatile rates past the IRM kink. We agree that the utility of lowering the max borrow APY and lowering rate volatility likely outweighs the opportunity cost to suppliers. 40% max borrow APY is currently a reasonable upper bound.
- At present, utilizations of Euler Prime stablecoin borrow APYs slightly tracks behind Aave. We agree that increasing the kink borrow APY by 0.5% will more closely match recent demand.
- Given the demand premium in Euler Yield for borrowing stablecoins as well as the recent general increase in market stablecoin demand, a 0.5% kink borrow APY raise in this market is expected to attract more supply while retaining sticky borrowers. We think this is reasonable to try to bolster growth given current conditions, though we will monitor for depressed utilization that may result, as current rates are already competitive.
- WETH Prime utilization has been oscillating close to the kink with the borrow APY slightly trailing Aave’s. Therefore we are aligned with the kink borrow APY increase by 0.2%.
- The proposed eUSDe kink change is already aligned with our latest recommendation.