[Gauntlet] wUSDM Asset Listing on Compound V3 Optimism USDC/USDT markets
Gauntlet advises against listing wUSDM on Compound V3 USDC/USDT markets on Optimism at this time, primarily due to its limited circulating supply (~$6M) and liquidity constraints. However, Gauntlet will continue to monitor the situation and provide updated recommendations based on changes in wUSDM’s market status and liquidity.
Analysis
The USDM token (reference) is a rebasing ERC20 token, redeemable at a pegged 1:1 USD value by primary users. USDM is a stablecoin, backed by “USDM Reserves”, which are held under custody with regulated financial institutions. The current USDM in Circulation is fully collateralized by USDM Reserves as of August 1, 2024 (reference).
USDM carries risks primarily related to depegging, where it could lose its $1 value if the collateral backing or algorithmic mechanisms fail. Additionally, there is regulatory risk, as stablecoins like USDM may face scrutiny over reserve management and compliance. Lastly, liquidity risk can arise if market conditions or platform issues reduce the ability to trade or redeem USDM at its intended value.
wUSDM stands for wrapped USDM. This wrapping process allows the token to be used on different blockchains. Wrapping and unwrapping tokens introduce risks such as smart contract vulnerabilities, centralization concerns, and liquidity issues, which can affect the safety and value of assets. Unwrapping risks also include redemption challenges and the potential for depegging, where the wrapped token may lose its value relative to the underlying asset. To mitigate these risks, it’s crucial to ensure smart contracts are audited, use decentralized custodians, and monitor market conditions closely.
Liquidity Sources
The following table summarizes the liquidity sources for wUSDM across various decentralized exchanges (DEXs) on Optimism:
| pool_name | pool_type | pool_url | pool_tvl_usd | volume_24h_usd |
|---|---|---|---|---|
| USDM / USDC | curve_optimism | Link | $1.02M | $6.25 |
Total DEX TVL (Ethereum): $1.02M
Total DEX TVL (Arbitrum): $6.25
Circulating Supply
Currently, USDM has an on-chain market capitalization of $6 million. Given this limited size and liquidity, we recommend holding off on listing it on Compound V3 USDC/USDT markets on Optimism until we observe further growth and increased liquidity. This would ensure a more robust market environment. Gauntlet will continue to monitor USDM’s progress and make updated recommendations based on its evolving market status.
Next Steps
We welcome community feedback on the proposed risk recommendations for wUSDM on Optimism USDC/USDT markets.
Note: The data provided in this document is accurate as of the publication date. Market conditions and liquidity levels may change, and it is advisable to regularly review these parameters to ensure they remain appropriate.