Market Downturn: Gauntlet Risk Review (Jan 2022)

Hi folks,

We wanted to give a quick update given the tumultuous past few days (Jan 21-24th). We have been observing the markets closely and can report that there were no major insolvencies during the crash we saw through the weekend. Importantly, we would note that no major insolvencies occurred even while Gauntlet increased Collateral Factors over the last several months; improved capital efficiency did not result in outsized risk to the protocol. We would note that there are some extremely small dust accounts (<$3,500 in borrow) that are newly insolvent (with the max insolvent amount for an account being $553). This is likely due to the accounts being too small to be liquidated profitably given gas costs, and similarly too small to justify topping up the account. We have attached a spreadsheet below listing out the newly insolvent accounts.

Since the start of Dynamic Risk Parameters, Gauntlet’s platform has optimized for capital efficiency to safely increase Compound’s revenue potential while maintaining risk at safe levels. While there have been no major insolvencies during this market crash, Gauntlet continuously ingests on-chain data to assess market risk which evolves as market conditions and borrower positions adjust, and we will update as conditions change.


See below for price changes on major crypto assets:

The protocol was able to healthily liquidate $95M in collateral across 687 positions and 368 users. In the chart below you can see the volume of liquidations across different assets and users:

One user experienced an outsized amount of liquidations at $67.4M (71% of total liquidation volume), and the next largest account was $2.5M.

We note that 27% of liquidations occurred outside the top 30 accounts by borrow. The top 30 accounts are quite safe, and you can see their collateralization ratios below:

Our goal with this update is to let the community know that the protocol is and continues to be safe from a market risk perspective. Do note that this is ongoing, and we will be monitoring how market conditions and ecosystem dynamics evolve.

New Insolvent Accounts:


Nice summary and timely analysis!