Summary
Given the recent increase in USDT and WETH supply within the Arbitrum comets, as a result of the Alphagrowth team’s incentive expansion plans as detailed here, Gauntlet recommends adjusting the risk and incentive parameters to further promote growth at higher utilization rates. A similar recommendation for the Arbitrum USDC Comet is available here.
Specification
Risk Recommendations
USDT Comet
| Parameter | Current Value | Recommended Value |
|---|---|---|
| WETH Supply Cap | 7,500 | 20,000 ($70M) |
| WETH Liquidation Factor | 85% | 90% |
| WETH Collateral Factor | 78% | 85% |
| WBTC Supply Cap | 250 | 1,200 ($32M) |
| wstETH Supply Cap | 1,500 | 5,000 ($20M) |
| wstETH Liquidation Factor | 80% | 85% |
| wstETH Collateral Factor | 70% | 80% |
WETH Comet
| Parameter | Current Value | Recommended Value |
|---|---|---|
| weETH Supply Cap | 550 | 6,000 ($22M) |
| weETH Liquidation Factor | 87% | 90% |
| weETH Collateral Factor | 82% | 85% |
| weETH Liquidation Penalty | 8% | 5% |
| WBTC Supply Cap | 300 | 1,200 ($32M) |
| wstETH Supply Cap | 2,000 | 10,000 ($41M) |
| rETH Supply Cap | 800 | 4500 ($15M) |
COMP Distribution Recommendations
USDT
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Daily COMP Supply | 12 | 12 |
| Daily COMP Borrow | 10 | 30 |
WETH
| Parameter | Current Value | Recommended Value |
|---|---|---|
| Daily COMP Supply | 6 | 6 |
| Daily COMP Borrow | 4 | 15 |
Analysis
USDT Comet Utilization and Supply Balance
As shown in the above graph, the Arbitrum USDT Comet has experienced a significant increase in USDT supply, driven by the Alphagrowth team’s incentive growth plans. WETH Comet has only been live for a short week, but it has experienced an overweight in supply ($43M supply vs. $5.94M borrows). More information on the incentive program can be found here, but the incentive program plans to continue for the next two months.
Currently, USDT and WETH utilization are at 30.85% and 13.7%, respectively. Gauntlet recommends adjusting the COMP borrow incentives to encourage further growth of borrowing demand on the protocol to match the demand of supply. Gauntlet plans to utilize this borrower incentive strategy until the market finds equilibrium or the LTIPP incentive program is completed.
USDT Borrow Incentives
WETH Borrow Incentives
We recommend increasing the caps for assets within the Comets to ensure future borrowers have ample liquidity for collateralized positions. DEX liquidity conditions on Arbitrum support these increases.
Next Steps
- Submit on-chain proposal for next week.