Weekly RiskDAO report 20 Jan ‘23

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

Summary

Crypto prices were green across the board over the last week. BTC broke through $21k and $SOL has 2x’ed from its recent low.

GUSD takes center-stage at MakerDAO as questions arise about Gemini’s future: Gemini Earn has granted loans worth $900m to Genesis which is part of DCG’s bankruptcy discussions. Gemini is also the issuer of the GUSD stablecoin to which the MakerDAO PSM has a $500m exposure. On 19 January, MakerDAO tokenholders were polled whether to keep this arrangement or to reduce the GUSD PSM debt ceiling to nil. The vote finished narrowly in favor of keeping the status quo (50.85% of all votes). The reduction of the debt ceiling would have tested Gemini’s fiat liquidity and might have forced a bank-run with unknown consequences. Earlier this week Tyler Winklevoss had posted a lengthy post in the MakerDAO forum, along with subsequent Q&A in their Discord, in an attempt to avoid GUSD FUD.

Ethereum liquid staking protocols continue to dominate headlines. There are a number of positive trends, such as Metamask integrating Lido & Rocketpool. Frax is receiving a fair amount of attention given the double-digit growth (+24%) of their LSD “frxETH” over the last 7 days (coming from a low base, however). Staked frxETH is a collateral asset on FraxLend and thus can contribute to the total supply of FRAX.

Protocols will want to grow market share of their liquid staking derivatives (LSDs) through promoting DeFi interoperability and utility. Some lending protocols are starting to focus on LSD as collateral asset: Myso Finance is launching on mainnet with rETH vaults. rETH is also a collateral asset on MakerDAO and proposed as a new asset on Aave. Euler just listed Coinbase’s cbETH as collateral. Lido staked Ether is eligible collateral on Aave and by extension Morpho, Gearbox, Euler, MakerDAO, Angle and dForce.

HECO-based lending market LendHub got exploited for $6m. The protocol replaced a collateral token with an updated version but forgot to delete the old one. According to SlowMist “The attackers were able to manipulate the minting and redeeming process in the old market while borrowing in the new market, ultimately stealing significant protocol funds from the new market.”

Stablecoin monitoring

GUSD liquidity stayed steady at $27m. sUSD liquidity declined from $29m to $27.5m and LUSD dropped from $56m to $51.4m. sUSD & LUSD backing continues to improve from 520% to 580% and 270% to 297%, respectively.

DEX liquidity for all other stablecoins remained largely unchanged.

CEX prices for GUSD differ materially from DEX prices (-8%). However, CEX liquidity for GUSD remains low.

Pools summary (weekly comparison)

DAI

Total pool size amounts to $18.6m, largely unchanged from the previous week. stkcvxcrvPlain3andSUSD remains the #1 asset ($9.8m), followed by stkcvxgusd3CRV ($4.4m) and yvDAI ($1.6m).

Total debt also remains steady at $15.5m.

The pool remains predominantly collateralized by stablecoins.

USDC

Total pool collateral amounts to $31.2m, with the largest collateral assets being stkcvxcrvPlain3andSUSD (+$1.5m to $18.6m) & stkcvxgusd3CRV ($4.9m, unchanged), followed by stkcvxcrvFRAX ($2.3m, unchanged). stkcvxLUSD3CRV-f fell to $1.6m, a reduction of $1.3m from last week.

This pool also remains large backed by stablecoin assets.

WETH

The pool experienced another weekly increase from $26.1m to $32.3m. The largest collateral assets are stETH (+$3.6m to $17.8m), stkcvxsteCRV (+$3.5m to $9.7M) and yvWETH (-$0.8m to $3.4m).

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

The disparity of CEX & DEX data for stETH prices has been closed. Both data sources display the same price levels.

WBTC

No material change compared to the previous week. Total collateral pool size stands at $0.14m and is dominated by WBTC ($75k).

wstETH

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

The existing credit accounts were likely closed due to the rate differential between the native staked ETH yield (5.2%) and the WETH borrow rate (3.2%): Traders rather borrow WETH at 3.2% instead of staked ETH for which the cost of capital is the sum of the 5.2% staking yield and borrow rate.

Summary

Current risk parameters are on par with our models.

We continue to closely monitor stablecoin liquidity.

Additional stats, updated daily, are available in our dashboard at https://gearbox.riskdao.org/

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