Gauntlet - Initial Parameter Recommendations for tBTC on v3 USDC Comet
Simple Summary
If the community decides to list tBTC on the USDC Comet on Mainnet, Gauntlet recommends the following risk parameters:
| Parameter | Value |
|---|---|
| Collateral Factor | 76% |
| Liquidation Factor | 81% |
| Liquidation Penalty | 10% |
| Supply Cap | 150 |
Analysis
Liquidity
| Asset | Dex Category | TVL (mil) | URL |
|---|---|---|---|
| tBTC | curve | 25.41 | Link |
| tBTC | curve | 7.99 | Link |
| tBTC | uniswap_v3 | 5.12 | Link |
| tBTC | balancer_ethereum | 1.01 | Link |
Total: $36.53M
$31.54 of the total liquidity is against WBTC, the other Curve pool is a tripool against crvUSD and wstETH.
Supply Cap and Liquidation Penalty
Given the above liquidity sources, we recommend setting the supply cap that would cause 5% slippage i.e half of the liquidation penalty although our methodology allows for higher supply caps. This means that the total slippage should the entire supply get liquidated needs to be < LP. Gauntlet recommends a supply cap of 530 tBTC (~$9,000,000), this swap would cause a slippage of ~5% vs a liquidation penalty of 10%
The tBTC can be redeemed for the underlying BTC within 3-5 hours.
Liquidation Factor and Collateral Factor
The Maximum drawdown against USDC is 8.5% along with a 30D Log volatility of 46.27%. tBTC’s maximum drawdown against WBTC is 1.65% with an annualized 30D log volatility of 3.9%.
tBTC/USDC
tBTC/WBTC
Given the lower liquidity of tBTC when compared to WBTC, and the higher 30D Annualized Log vol for tBTC/USDC when compared to WBTC/USDC, we recommend discounting the existing WBTC’s CF and LF by the persisting 30D Annualized Log vol between tBTC/WBTC (~4%) as the new CF and LF for tBTC. The recommended new CF and LF for tBTC is 76% and 81%.
Bridge Risk
Gauntlet would like to flag that tBTC relies on bridging mechanisms (Wormhole) for mint and redemption, this exposes the protocol to smart contract and systemic risks should the protocol be compromised.