Overview
Chaos Labs supports listing AERO in Isolation Mode. Following is our analysis and risk parameter recommendations for the initial listing.
Liquidity and Market Cap
When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of AERO over the past 180 days was ~$183.95M, and the average daily trading volume was ~$17.39M (CeFi & DeFi).
Liquidation Threshold
Analyzing AERO price volatility over the past 180 days, we observed a daily annualized volatility of 287.59% and a 30-day annualized volatility of 108.47%. Considering this volatility, we recommend launching with an LT of 40%.
Debt Ceiling
Following Chaos Labs’ Isolation Mode Methodology, we recommend an initial debt ceiling of $2M. Under the methodology for Isolation Mode, we consider two levels of probabilities for extreme price drops: Medium-High and High. We estimate the high probability of an extreme price drop for AERO.
Supply Cap, Borrow Cap, and Liquidation Bonus
Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.
Given AERO’s liquidity, we recommend a 10% Liquidation Bonus, a supply cap of 11,000,000 AERO, and a borrow cap of 5,500,000 AERO.
Recommendations
We recommend aligning the interest rate parameters to be competitive with long-tail assets across other lending protocols.
Following the above analysis, we recommend listing AERO with the following parameter settings:
| Parameter | Value |
|---|---|
| Isolation Mode | Yes |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap (AERO) | 11,000,000 |
| Borrow Cap (AERO) | 5,500,000 |
| Debt Ceiling | $2M |
| LTV | 30.00% |
| LT | 40.00% |
| Liquidation Bonus | 10.00% |
| Liquidation Protocol Fee | 10.00% |
| Reserve Factor | 20.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 9.00% |
| Variable Slope2 | 300.00% |
| Uoptimal | 45.00% |