Simple Summary
Gauntlet aligns with listing ezETH as collateral on the WETH v3 Comet given the withdrawals being enabled and pending any additional audits. The below risk recommendations are a refresh of the analysis done previously.
| Parameter | Value |
|---|---|
| Collateral Factor | 80% |
| Liquidation Factor | 85% |
| Liquidation Penalty | 10% |
| Supply Cap | 2,900 |
Analysis
ezETH Liquidity sources
Total TVL: $144mil
The balancer ezETH-WETH pool continues to be the largest source of liquidity for ezETH, where the composition of this pool is still largely ezETH, where it makes up more than 92% of the TVL. The total WETH across all the liquidity sources at current WETH prices amount to ~$21M.
Apart from the above ezETH, liquidity is available in tripool of ezETH/rswETH/weETH having total TVL of $12.3M as ancilliary sources of liquidity. However as mentioned in the previous post, we are more concerned with the liquidity with respect to WETH, and only limit our sources to WETH pools.
Supply Cap and Liquidation Penalty (LP)
Although in the previous LRT listing recommendations we used 5% slippage to be a sufficient benchmark for supply caps against a Liquidation Penalty of 10%, given the skewed TVL for ezETH on dexes towards higher ezETH concentration, Gauntlet recommends a supply cap amounting to half of WETH liquidity available in the above pools. The recommended supply cap would then be $10.5M in WETH, i.e. 2,900 ezETH.
Liquidation Factor and Collateral Factor
| Metric | Value |
|---|---|
| Annualized Volatility | 28.3% |
| Max Drawdown from Exchange Rate | 4.64% |
Liquidation Factor = 1 - (LP+Volatility)
Considering the provided metrics alongside the proposed Liquidation Penalty, application of the below formula yields an LF of 70% and CF of 65%. However, Gauntlet recommends aligning the LF and CF with those of weETH and rsETH,i.e an LF of 85% and CF of 80%. As seen in the above visualization, ezETH is gradually regaining peg to WETH along with withdrawals being enabled soon. Gauntlet believes that these recommended adjustments would more accurately depict ezETH’s risk profile.
Oracles
As mentioned in the [Franklin DAO] Request for comment on: Market pricing vs. exchange rate pricing for LSTs and potential oracle implementations post, Gauntlet supports exchange rate oracles for ezETH within this correlated Comet if the community decides to pursue this strategy. Renzo’s team has created a rate provider contract to get the exchange rate.
Yield Risk
Currently LRTs such as ezETH have elevated yields due to points program. EigenLayer maturity and AVS launch will cause yield shocks and consequentially elevate slippage magnitude and liquidity on DEXs. Gauntlet would like flag this potential risk to the community.
IR Curve Parameters
Gauntlet recommends the IR in line with previous LRT asset listing recommendations in the WETH Comet to account for higher utilization due to the prospective addition of ezETH.