Weekly RiskDAO report 25 Nov ‘22

Summary

This week saw unusually high volatility of Curve’s governance token $CRV. Addresses linked to Avi Eisenberg loop-borrowed $CRV with $USDC collateral on Aave: $USDC was deposited, $CRV borrowed and sold for $USDC which then got deposited again in order to borrow more $CRV.

It is not clear what the endgoal of this scheme was but what is certain is that $CRV pumped to 70 cts after dipping to 40 cts. This in turn forced the Aave protocol to liquidate $USDC to buy back $CRV. Given sparse on-chain liquidity, Aave got stuck with 2.68m $CRV (c. $1.8m) in bad debt as liquidations could only get executed partially.

Given the initial price decline of $CRV and suspected short-selling attack, this is also relevant to Gearbox. However, the $CRV collateral only accounts for $2,000 across the DAI & USDC pools, for which there would have been enough on-chain liquidity to liquidate, and the liquidation factor is 0.25, meaning it could of absorb even 75% price decrease during the liquidation process

Such an “attack” is unlikely to play out on Gearbox given the risk params are defined per asset. While in Aave design the USDC liquidation threshold is the same (regardless of the debt asset), in Gearbox there is a (potentially) different liquidation threshold for every collateral and debt pair. Further, account sizes in Gearbox are capped, and users are whitelisted, which would have prevented a single user from generating such a huge position.

There was relatively little FUD wrt stablecoins this week.

Stablecoin monitoring

GUSD liquidity recovered from $14.7m to $18.0m since 18 Nov. sUSD backing improved from 388% to 418%.

FRAX saw a small reduction in liquidity of c. $10m.

Pools summary (weekly comparison)

DAI

Total pool collateral has declined by $1.2m to $17.3m. The reduction is due to lenders removing gusd3CRV tokens. Plain3SUSD increased its weight by $400k to a total of $6m in the pool.

The pool remains predominantly collateralized by stablecoins

USDC

Total pool collateral also declined by $1.2m to $30.3m. A large part of that drop was accounted for by Plain3SUSD and 3CRVFRAX tokens. gusd3CRV saw a slight increase by $0.2m to $7.2m.

This pool also remains large backed by stablecoin assets.

WETH

Total pool collateral increased by $1.8m mostly driven by yvWETH (+$3.3m to $19.3m) at the expense of stETH (-$1.2m to $6.1m).

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

WBTC

The pool is currently empty

wstETH

Total pool assets and composition remains largely unchanged compared to last week with $1.7m total assets and mostly derivative ETH collateral.

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/

1 Like