This report builds upon Gauntlet’s Market Downturn Risk Review, with the goal of keeping the community informed of market risks pertaining to Compound. So far, Gauntlet has executed 7 sets of parameter recommendations as part of our Dynamic Risk Parameters engagement. Over the past two months, Gauntlet has executed 2 sets of recs and has implemented seven (7) parameter suggestions across seven (7) assets.
| Old Collateral Factor | New Collateral Factor |
|---|---|
| ETH (80%) | 82.5% |
| UNI (70%) | 75% |
| LINK (70%) | 75% |
| MKR (55%) | 60% |
| AAVE (60%) | 65% |
| YFI (60%) | 65% |
| SUSHI (55%) | 60% |
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 Announces Collaboration with Moody’s on Risk Management in DeFi
- Gauntlet Parameter Recommendation Methodology
- Gauntlet Model Methodology
- Deep Dive on Value at Risk
Gauntlet has launched the Compound Risk Dashboard and has invested in improvements to their infrastructure to enable daily updates. The community should use the dashboard linked above to better understand the updated parameter suggestions and general market risk in Compound. Gauntlet is keen on continuously bettering their dashboards and has been conducting user studies with members of this community and others to inform future iterations.
Highlights
Supply changes of key collateral assets from 01/25/2022 to 02/28/2022
Borrow changes of key collateral assets from 01/25/2022 to 02/28/2022
Price changes of key collateral assets from 01/25/2022 to 02/28/2022
Liquidations breakdown by collateral from 01/25/2022 to 02/28/2022
Liquidations breakdown by account from 01/25/2022 to 02/28/2022
Top 10 liquidations breakdown by account from 01/25/2022 to 02/28/2022
Insolvent accounts on 02/28/2022
New insolvent accounts from 01/25/2022 to 02/28/2022
This shows all insolvent accounts on 02/28/2022, which were solvent on 01/25/2022. Note that the only insolvencies are from negligible dust accounts, the largest of which has $1,600 supplied and the largest insolvent amount of $204.
Previous insolvent accounts from 01/25/2022 and differences up to 02/28/2022
This shows the 02/28/2022 state of all accounts which were insolvent on 01/25/2022.
Total insolvencies from 01/25/2022 to 02/28/2022
90-day time series of collateral-specific volatility
Using the 28 day trailing data and the Garman Klass volatility estimator, which utilizes both daily high H_i and low L_i prices, as well as daily opening O_i and closing C_i 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.
60-day time series of collateral-specific protocol collateralization ratios
The average collateralization ratio for an asset is a valuable indicator of how risky borrowers are behaving. The recent price drop has led to decreases in average collateralization across certain assets.
90-day time series of liquidation volume
