Summary
Following an analysis of market data, we provide recommendations for various parameters on Seamless.
Analysis
LT/LTV
LT and LTV parameters are determined by both liquidity and asset volatility. Liquidity on Base has continued to improve, leading us to recommend increasing some parameters. Additionally, volatility for the assets for which we recommend increasing LT and LTV has remained steady or decreased.
For cbETH and wstETH, the amount that can be swapped for USDC at 1% slippage is 3,750 and 4,150, respectively. Both figures have increased significantly in recent months and indicate that, theoretically, there is sufficient liquidity to liquidate their entire markets in a single block.
Additionally, both assets have demonstrated strong peg stability in recent months, allowing us to recommend increasing their collateral parameters, with LTVs set to 75% and LTs to 79%.
Moreover, WETH’s liquidity on Base has continued growing steadily, with a 5,000 WETH for USDC swap now able to be processed below 1% slippage. Again, this indicates that there is more than sufficient liquidity to support the market on Seamless, which allows us to recommend increasing its LTV and LT to 80% and 83%, respectively. We also recommend increasing its UOptimal to 90%, as Base’s liquidity is sufficient to support greater asset borrowing.
Finally, we recommend decreasing USDbC’s LTV to 75% to favor USDC as we continue to migrate the former market to the latter.
Reserve Factor
As in previous analyses, we recommend increasing the Reserve Factor for USDbC to 25%, again to favor USDC and encourage migration. Additionally, we recommend increasing USDC’s RF to 10%, aligning with the prevailing market rate and ensuring Seamless generates sufficient fees from this market.
Interest Rates
Moving to interest rates, we find that USDbC has had brief periods of heavy utilization, leading to spikes in borrow rates. However, these spikes have been relatively short-lived, indicating that the Slope2 is functioning well. To reduce instances of overutilization and again favor USDC, we recommend increasing the Slope1 to 8%.
DAI has been slightly underutilized for most of the past two months but recently became over-utilized as a user repaid $10K DAI; the market’s small size ($40K supplied) makes its interest rate volatile. To align its IR curve with the observed rate for most of the past two months, we recommend decreasing Slope1 to 5.5%.
EURC and USDC have both demonstrated relatively stable borrow rates, with a surge coinciding with the broader market rally beginning on November 5. Thus, we do not recommend adjusting their Slope1s at this time. However, for USDC, we recommend lowering its Slope2 to 75% (aligned with other stablecoins) to ensure that rates do not become too volatile when utilization exceeds 90%. USDC’s strong liquidity on Base reduces the risk of USDC being over-utilized.
Other assets are functioning well, with AERO’s over-utilization reducing throughout November, now at UOptimal.
Specifications
| LTV | LT | Reserve Factor | Slope1 | Slope2 | UOptimal | |
|---|---|---|---|---|---|---|
| AERO | 30.0% | 40.0% | 20% | 9.00% | 300.00% | 45.0% |
| cbBTC | 73.0% | 78.0% | 20% | 4.00% | 300.00% | 45.0% |
| cbETH | 65.0% → 75.0% | 72.0% → 79.0% | 10% | 7.00% | 300.00% | 45.0% |
| DAI | 77.0% | 80.0% | 10% | 7.00% → 5.50% | 75.00% | 90.0% |
| EURC | 65.0% | 70.0% | 20% | 7.00% | 75.00% | 90.0% |
| USDbC | 77.0% → 75.0% | 80.0% | 15% → 25% | 7.00% | 75.00% | 90.0% |
| USDC | 77.0% | 80.0% | 5% → 10% | 7.00% → 8.00% | 300.00% → 75.0% | 90.0% |
| WETH | 75.0% → 80.0% | 80.0% → 83.0% | 10% | 2.50% | 80.00% | 80.0% → 90.0% |
| wstETH | 65.0% → 75.0% | 72.0% → 79.0% | 10% | 7.00% | 300.00% | 45.0% |