[Gauntlet] Stablecoin Recommendations for WETH Comets
Summary
Gauntlet recommends the following risk parameters for the listed assets:
| Asset | Comet | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|---|
| USDC | Ethereum WETH | 80% | 85% | 5% | 50M |
| USDT | Ethereum WETH | 80% | 85% | 5% | 50M |
| USDC | Arbitrum WETH | 80% | 85% | 5% | 30M |
| USDT | Arbitrum WETH | 80% | 85% | 5% | 20M |
| USDC | BASE WETH | 80% | 85% | 5% | 20M |
| USDC | Optimism WETH | 80% | 85% | 5% | 15M |
| USDT | Optimism WETH | 80% | 85% | 5% | 10M |
Analysis
Based on our analysis of WETH borrowing positions within the Lending ecosystem, Gauntlet recommends adding both USDC and USDT to the Comets. Given WETH’s high volatility relative to USDC, we advise setting the Liquidation Factor at 85% and the Collateral Factor at 80%. For context, WETH exhibits a Daily Log Volatility of 49% and a Maximum Daily Price Change of 18% over the past year.
Gauntlet wants the community to be aware that Compound v3 Comets will face a limitation compared to other multi-liquidity protocols: the Comet markets will not offer supply APY on stablecoin collateral, which is currently around ~6%. However, Comets will enable higher leverage thresholds since the stablecoin will only be used to borrow WETH.
Regarding stablecoin collateral, DAI is used less frequently than USDC and USDT for borrowing WETH. Our analysis indicates that USDC and USDT hold around 0.50% or more of the market share, whereas DAI’s market share is significantly lower.
Next Steps
- Welcome feedback from the community