Migrate mEDGE and mMEV from Euler Yield to Frontier

Euler DAO Markets
1

Summary

Objective Labs recommends offboarding mEDGE and mMEV vaults from Euler Yield based on fundamental risk-related reasons. We encourage borrowers to migrate to the recently created Frontier Markets for mEDGE and mMEV. We’ve reached out to the major borrowers with this information.

Rationale

Midas mEDGE and mMEV are so-called liquid yield tokens (LYTs), tokens representing a share in a leveraged delta-neutral yield strategy operated respectively by Edge Capital and MEV Capital. These assets exhibit a number of characteristics that do not fit Euler Yield’s general risk profile:

  • The underlying portfolio changes often, and their overall risk exposure is hard to pin down.
  • LYTs take on leverage. Enabling them as collateral multiplies the total leverage in the system. We’ve observed instances where the portfolio of these LYTs itself contains tokens representing leveraged yield strategies.
  • Instant redemption capacity has rarely reached the 10% target. For example, mMEV currently has ~$700k (1%) redemption capacity which is insufficient given the high LLTV assigned in the market.
  • Frontier mEDGE and mMEV have ample capacity to accommodate the outstanding

Recommendations

We recommend initiating the offboarding process for mMEV and mEDGE with a 30-day LTV rampdown.

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Gauntlet supports offboarding mMEV and mEDGE from Euler Yield now that the Frontier Markets are live and available for migration. We’re aligned with the proposed 30-day LTV rampdown and would also recommend setting the Supply Caps for both assets to Zero during this period to help prevent new deposits. This should support a smooth transition while limiting further risk to Euler Yield.