Compound III Supply Caps

Raising supply caps could result in more collateral being liquidated (from increased usage) and sold by liquidators on the exchange, thus increasing slippage and the chances of cascading liquidations. That being said, the proposed supply caps for ETH ($99m) and WBTC ($115m) compare with the liquidity of each token-pair on trading platforms:

  • Uniswap v3:
    • USDC-WETH: $210m in liquidity, $75m in volume
    • USDC-WETH (a separate pool): $167m in liquidity, $420m in volume
    • USDC-WBTC: $31m in liquidity, $21m in volume
  • Uniswap v2:
    • USDC-WETH: $101m in liquidity, $9.9m in volume

While COMP presents more risk relative to ETH and BTC given its trading volume, we note the proposed supply caps for all three tokens are relatively low when compared to ADV:

  • ETH: $16.4b
  • BTC: $52.4b
  • COMP: $62.9m
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