Summary
Considering the rapid expansion of markets within the base ecosystem, we support increasing caps to support protocol for USDC, USDbC, and wstETH as proposed.
USDC
The majority of USDC supply is used together with WETH and USDbC to borrow the same assets, making the position exposure very low. This is also the most significant borrow position of USDC. Therefore, we do not identify high risk in increasing supply cap to 8M and the borrow caps to 6M.
As there was previously limited demand for native USDC, we did not recommend an increase at the time. However, with the recent introduction of native USDC rewards, which has led to a supply cap utilization of 100%, it has become viable.
wstETH
Given the liquidity levels observed for stETH on Base and the expected use of wstETH supply for looping against ETH, which are expected to create delta neutral positions, we support the increase of the supply cap to 800. We do not identify any additional risk in increasing the borrow caps to 400.
USDbC
A single delta-neutral USDbC position constitutes 75% of all borrows, with the remaining positions also primarily engaged in delta-neutral farming strategies.
Based on the current distribution of USDbC collateral utilization and the availability of liquidity on decentralized exchanges, we support increasing the Borrow Cap from 10M to 15M.
