[Gauntlet] - Mantle USDe Comet Recommendations
Simple Summary
We recommend the following initial parameter recommendations for the Mantle v3 USDe comet:
Risk Parameters
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| mETH | 80% | 85% | 10% | 3000 mETH |
| WETH | 82% | 87% | 7% | 2800 WETH |
| FBTC | 78% | 83% | 12% | 120 FBTC |
Rationale
Mantle has been witnessing growing TVL on its chain with over $420M locked. The TVL is up 236% YTD.
The DEX volumes have shown strong growth peaking in August this year and inching back to >$40M as of today.
Bridging of assets to Mantle has been providing tailwinds for the TVL on chain, with over $1bn bridged to Mantle in the past 12 months.
USDe
Ethena has experienced exponential growth in Total Value Locked (TVL), surpassing $2.8 billion in the protocol. The current daily volume exceeds $164 million. Ethena’s USDe serves as a synthetic dollar, tokenizing delta-neutral derivative positions involving ETH and BTC. Meanwhile, sUSDe is a staked version that captures yields from staked Ethereum, along with funding rates and spreads from delta-hedged positions. The staking of USDe into sUSDe enables yield arbitrage opportunities. The current comet structure can allow users to borrow USDe and stake for additional yield. Given the lower prevalence of sUSDe on Mantle, Gauntlet advises to add sUSDe as a collateral asset given the prevailing market liquidity.
Supply Caps and Liquidation Penalty
Reviewing the liquidity pathways from the proposed collateral assets (FBTC, mETH, WETH) to USDe, Gauntlet recommends adding an additional 2% buffer to the Liquidation Penalties of like assets on the USDC Comet.
| Asset | Liquidation Penalty |
|---|---|
| mETH | 10% |
| WETH | 7% |
| FBTC | 12% |
The additional 2% in LP buffer stems from the Annualized Daily Log Vol of USDe/USDC. Gauntlet recommends keeping this to 2x of annualized log vol when assessing liquidation penalties to that of the USDC Comet.
Although we recently recommended an increase in LP for WBTC due to the speculation around the custodial process, the current FBTC liquidity warrants higher LP and the recommended level is suitable to balance risk and capital efficiency. Gauntlet will monitor liquidity conditions and adjust Liquidation Penalty as suitable.
Gauntlet recommends setting the supply caps to the following:
| Asset | Supply Cap |
|---|---|
| mETH | 3000 |
| WETH | 2800 |
| FBTC | 120 |
FBTC Slippage
mETH Slippage
WETH Slippage
Collateral Factors (CF) and Liquidation Factors (LF)
Gauntlet recommends adjusting the CF and LFs with respect to the recommended Liquidation Penalties (LP). The recommended values are as follows
| Asset | Collateral Factor | Liquidation Factor |
|---|---|---|
| mETH | 80% | 85% |
| WETH | 82% | 87% |
| FBTC | 78% | 83% |
Risks associated with Ethena
For detailed risk vectors pertaining to Ethena please refer to those outlined in this post.
Storefront price factor: 60%
Targetted Reserves: 5M
Seed Reserves: 75k
IR Curve Parameters
Gauntlet recommends aligning the IR parameters to those of stablecoin comets :
| Parameter | Recommended Value |
|---|---|
| Annual Borrow Interest Rate Base | 0.015 |
| Annual Borrow Interest Rate Slope Low | 0.0333 |
| Borrow Kink | 0.9 |
| Annual Borrow Interest Rate Slope High | 4.0 |
| Annual Supply Interest Rate Base | 0 |
| Annual Supply Interest Rate Slope Low | 0.039 |
| Supply Kink | 0.9 |
| Annual Supply Interest Rate Slope High | 3.6 |
Utilization vs APRs & Reserve Factor
At 90% kink, the Borrow APR is 4.5% and Supply APR is 3.51%, the comet will have positive reserve growth when the utilization is >72%
Incentive Parameters
Our COMP rewards recommendations are designed to offer appealing distribution APRs when the comets are first launched and when supply caps are highly utilized.
Gauntlet is recommending supply rewards to incentivize a more significant inflow of supply tokens into the protocol. This is important in the early stages of protocol growth before borrowers can join. Daily COMP rewards are subject to change as TVL rises and the markets evolve.
| Daily COMP Supply Rewards | Daily COMP Borrow Rewards |
|---|---|
| 4 | 4 |
With the above utilization and the present Interest Rate curve:
- Supply APR: 3.51%
- Borrow APR: 4.5%
Given the current COMP price of $45 at 90% utilization:
- Supply Distribution APR: 0.65%
- Borrow Distribution APR: 0.72%
This results in the following Net APRs:
- Net Supply APR: 4.16%
- Net Borrow APR: 3.77%