Compound Monthly Risk Review (May 2022): Updates and Review

This report builds upon Gauntlet’s Market Downturn Risk Review and Gauntlet’s Quarterly Risk Review to keep the community informed of market risks pertaining to Compound. So far, Gauntlet has executed 11 sets of parameter recommendations as part of our Dynamic Risk Parameters engagement.

Gauntlet’s parameter updates align with the Moderate risk level that the Community has collectively voted for.

In addition to managing market risk for Compound, Gauntlet also has invested in creating educational resources to help the Compound Community and the broader DeFi community better understand market risk. Gauntlet has recently published the following educational documentation and advises that the community review these resources:

Gauntlet has launched the Compound Risk Dashboard and has invested in improvements to its infrastructure to enable daily updates. The community should use the dashboard linked above to understand better the updated parameter suggestions and general market risk in Compound. Gauntlet is keen on continuously bettering its dashboards and has been conducting user studies with members of this community and others to inform future iterations.


Supply changes of key collateral assets from 05/01/2022 to 05/31/2022

Borrow changes of key collateral assets from 05/01/2022 to 05/31/2022

Price changes of key collateral assets from 05/01/2022 to 05/31/2022

Liquidations breakdown by collateral from 05/01/2022 to 05/31/2022

Liquidations breakdown by account from 05/01/2022 to 05/31/2022

Top 10 liquidations breakdown by account from 05/01/2022 to 05/31/2022

Insolvent accounts on 05/31/2022

New insolvent accounts from 05/01/2022 to 05/31/2022

This shows all insolvent accounts on 05/31/2022, which were solvent on 05/01/2022. Note that the only insolvencies are from negligible dust accounts, the largest of which has $1024 supplied and the largest insolvent amount of $387.

Previous insolvent accounts from 05/01/2022 and differences up to 05/31/2022

This shows the 05/31/2022 state of all accounts which were insolvent on 05/01/2022.

Total insolvencies from 05/01/2022 to 05/31/2022

Time series of collateral-specific volatility from 05/01/2022 to 05/31/2022 for non-stablecoin assets

Using the 28-day trailing data and the Garman Klass volatility estimator, which utilizes both daily high Hi and low Li prices, as well as daily opening Oi and closing Ci prices, the annualized volatility for each asset can be calculated as follows:

If you are unfamiliar with the concept of volatility, please reference this writeup from Gauntlet.

Time series of collateral-specific protocol collateralization ratios from 05/01/2022 to 05/31/2022 for key assets

The average collateralization ratio for an asset is a valuable indicator of how risky borrowers behave.

Time series of liquidation volume from 05/01/2022 to 05/31/2022