Weekly RiskDAO report 16 June ‘23

All referenced data can be accessed directly on the Gearbox dashboard by RiskDAO.

Summary

Altcoins took a tumble over the weekend as Robinhood (and later eToro) ceased support for a number of Alts, incl ADA, MATIC, SOL which triggered market sales by large market makers. As a consequence, most Alts were down 20% during thin weekend liquidity.

Curve Finance’s founder/CEO Michael Egorov has been on a borrowing spree totalling $105m in loans across Aave, Abracadabra and FraxLend. A significant part of that loan exposure sits on Aave v2 whose risk manager Gauntlet is now proposing to freeze CRV markets and set the LTV to nil. CRV on-chain liquidity has fallen dramatically along with the wider market downturn and a $10m sell order via 1inch would result in a 20% price decline. This thin market depth combined with such substantial loan volume could trigger material liquidations for which there is no incremental bid liquidity.

Aave’s GHO stablecoin launch is imminent with the first “Facilitator” being an Ethereum pool on Aave v3. A second facilitator - called Flashminter - will allow GHO borrow and repay in the same transaction.

Stablecoin TUSD, which has recently been taking over the void left behind by BUSD on Binance, has paused minting via Prime Trust whilst all other minting and redemption services are unaffected.

Lending protocol Sturdy Finance has been exploited for $800k through a re-entrance attack. The team is currently negotiating with the hacker to receive all funds back for a $100k bounty.

Updates

The Gearbox team has initiated two proposals to add new collateral to the WETH and OHM pools:

RiskDAO collaborated with Gearbox on these proposals: The suggested parameters are in line with our simulation results.

Stablecoin monitoring

GUSD liquidity fell from $11.9m to $6.6m. sUSD liquidity declined from $18.1m to $14.5m. LUSD liquidity increased from $22m to $24.3m. sUSD backing fell from 380% to 331%. LUSD backing declined from 258% to 245%.

There are no significant oracle deviations between DEX and CEX prices. The only deviation standing out is the sUSD CEX price which is 7.4% below the oracle price.

Watchlist

stkcvxcrvPlain3andSUSD has an outsized share within the collateral pool as it accounts for 35% (unchanged) of the total. The ratio has come down from a peak of ~40%. We continue monitoring this ratio to avoid concentration risk from building up.

Pools summary (weekly comparison)

DAI

There’s been no weekly change in the pool composition and volume.

Total pool size stayed flat at $12.1m. stkcvxcrvPlain3andSUSD remains the #1 asset at $7.2m (unchanged), followed by stkcvxgusd3CRV at $2.9m (unchanged) and yvDAI at $1.2m (unchanged).

Total debt also remained unchanged at $10.2m.

The pool remains predominantly collateralized by stablecoins.

USDC

There’s been only minor weekly changes in the pool composition.

Total pool stayed at $16m, with the largest collateral assets being stkcvxcrvPlain3andSUSD at $9.6m, followed by stkcvxgusd3CRV at $3.8m and stkcvxLUSD3CRV-f at $1.7m.

This pool also remains largely backed by stablecoin assets.

Total debt stayed flat at $13.5m.

WETH

The pool amount decreased from $19.4m to $17.3m. The largest collateral assets are stETH (-$2m to $15.2m), stkcvxsteCRV (-$0.1m to $1.1m) and FRAX ($0.5m, unchanged).

The pool remains collateralized by mostly ETH or staked ETH assets.

Total debt fell from $15.7m to $13.9m.

FRAX

This pool has total collateral of $2.6m (unchanged), mostly in the form of stkcvxgusd3CRV

($1.8m) & yvDAI ($0.8m).

Total debt stands at $2.2m.

WBTC

The pool has no active credit accounts. Last week’s lending and borrowing positions were closed.

wstETH

Demand for borrowing stETH continues to be subdued with no active credit accounts. This is a continuation from the previous week.