[Gauntlet] - Updated ETHx Asset Listing Recommendation
Simple Summary
Since our last recommendation, we’ve observed increased slippage when swapping ETHx to WETH. Therefore, Gauntlet recommends updating the listing parameters for this asset accordingly:
| Parameter | Value |
|---|---|
| Collateral Factor | 85% |
| Liquidation Factor | 90% |
| Liquidation Penalty | 5% |
| Supply Cap | 2,100 |
ETHx TVL in pools has been trending upwards. The below table outlines major ETHx/WETH pools and their TVLs.
| Dex Category | TVL (mil) | URL |
|---|---|---|
| balancer_ethereum | 32.77 | Link |
| curve | 12.69 | Link |
| balancer_ethereum | 5.72 | Link |
| curve | 5.44 | Link |
| balancer_ethereum | 0.70 | Link |
| uniswap_v3 | 0.13 | Link |
| pancakeswap-v3-ethereum | 0.10 | Link |
| uniswap_v3 | 0.06 | Link |
| curve | 0.04 | Link |
| pancakeswap-v3-ethereum | 0.02 | Link |
| balancer_ethereum | 0.02 | Link |
| curve | 0.01 | Link |
Total TVL: 57.72mil
The Balancer ETHx-WETH pool stands out as the primary liquidity source with $32.77M worth of WETH. It’s worth noting that there are additional liquidity pools involving LST/LRT pairs that contribute to the overall liquidity profile of ETHx. These peripheral sources of liquidity are not accounted for in the list above.
Supply Cap and Liquidation Penalty
A 5% slippage would amount to ~$7.8M worth of ETHx being sold. Given the above liquidity sources, we recommend setting the supply cap that would cause 5% slippage. Gauntlet recommends a supply cap of 2,100 ETHx.
Liquidation Factor (LF) and Collateral Factor (CF)
| Metric | Value |
|---|---|
| Annualized Volatility | 5% |
| Max Drawdown from Exchange Rate | 1% |
Given the above metrics along with the proposed Liquidation Penalty, Gauntlet recommends
Liquidation Factor = 1 - (LP+Volatility)
This would give an LF of 90%, and a CF of 85%
Use of Exchange Rate Oracles
If exchange rate oracles are implemented, Gauntlet can recommend more capital efficient parameters as the asset remains insulated from market movements, although exposes it to tail-end risks. The exchange rate based risk parameters could facilitate higher caps and Liquidation Factors along with more conservative Liquidation Penalties. Gauntlet supports exchange rate oracles for ETHx within this correlated Comet if the community decides to move forward with this strategy.