Gauntlet Update 2023-03-12
Key Metrics
Below we present some key metrics regarding the depeg event as of 2023-03-12.
| Current Loss | Current MTM Loss | Current USDC Price |
|---|---|---|
| $0 | $0 | $0.97 |
| Current Ethereum USDC Liquidity | USDC Liquidity WoW |
|---|---|
| $37.9mm* | 45.4%** |
*(2% DEX price depth)
**(pcnt of liquidty compared to 7d ago)
Key Risks
USDC price falls and stabilizes at less than $0.855
In the case that the USDC price falls and stabilizes below $0.855, existing Compound v2 USDC suppliers would still be able to utilize the hardcoded USDC oracle price of $1.00 and the USDC collateral factor of 85.5% to borrow against their supply, thereby leaving the protocol with insolvencies.
Current Gauntlet Recommendations
If the community believes that USDC price has stabilized and there’s a trivial (< 1%) chance USDC price decreases below $0.855, then Gauntlet recommends no changes to the v2 protocol. Otherwise, we recommend pausing borrows for all assets or decreasing USDC collateral factor. The protocol is still vulnerable to users borrowing against USDC collateral if the price drops below $0.855.
Current Initiatives
| Initiative | Status | ETA | Updates |
| Market Monitoring | In Progress | 3/14/23 PM* | Market montioring is part of our Risk Management service. We are monitoring all markets closely and will notfiy stakeholders as markets change. |
| Risk Recommendations | In Progress | 3/14/23 PM* | We will continue to provide recommendations to the community and Guardians as conditions change in case drastic action needs to be taken. |
| Conversations to explain risk to stakeholders | Complete | 3/11/23 AM | |
| Inital Analysis | Complete | 3/10//23 PM | Our initial analysis was complete late evening on 3/10/2023 and communicated to stakeholders |
| Initial forum post | Complete | 3/10/23 PM | Link here |
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*This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date
Appendix
USDC supply analysis
Entire supply positions of top 30 v2 USDC suppliers on 2023-03-09
Entire borrow positions of top 30 v2 USDC suppliers on 2023-03-09
Entire supply positions of top 30 v2 USDC suppliers on 2023-03-11
Entire borrow positions of top 30 v2 USDC suppliers on 2023-03-11
USDC supply in Compound v2 has decreased since the depeg, which decreases risk to the protocol, especially given new USDC supply is paused.
The largest recursive USDC borrower ($72.6M supplied, $61.6M borrowed) with address 0x46cc9435ce65206a1b55caffeb9c14e5adc355ef exited the protocol.
The second largest USDC recursive borrower with address 0x342491c093a640c7c2347c4ffa7d8b9cbc84d1eb decreased their supply from 58.4M tokens to 41.5M tokens
The largest non-recursive USDC supplier with address 0xe2773fb045e53de5344f245e03ea614af1064ce3 decreased their USDC supply from 30.2M tokens to 7.4M tokens, along with other top non-recursive suppliers.
The user with address 0xc2f61a6eeec48d686901d325cde9233b81c793f3 who supplies 20.725M USDC tokens and borrows 17.1M USDT tokens poses the most risk to the protocol in the case that USDC depegs below $0.855. Given the USDC price of $0.96, this user actually has a borrow usage of > 100% and would be liquidatable if the USDC oracle price wasn’t hardcoded at $1.00, and would be insolvent if the USDC price decreases below $0.825. One risk mitigation strategy is to decrease USDC collateral factor, to provide an extra buffer against USDC depeg insolvencies. However, in doing so, this account would become liquidatable, and might cause additional sell pressure for USDC.
In a follow-up post we will discuss how the recent changes in USDC and DAI supplies have affected the v2 → v3 migration.