Summary
A proposal to:
- Increase USDC’s supply and borrow caps on the Unichain pool
All recommended increases are backed by Chaos Labs’ risk simulations, which consider the user behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.
WETH (Unichain)
WETH’s supply cap utilization has reached 100%, while its borrow cap utilization stands at 82%.
Supply Distribution
The supply distribution of WETH presents minimal liquidation risk, as all WETH suppliers are borrowing WETH itself, which significantly reduces the likelihood of liquidations.
The largest borrowed asset against WETH is WETH itself, accounting for 93% of the total distribution.
Recommendation
Based on current user behavior, further increasing the supply cap appears reasonable. However, we recommend taking a conservative approach and not raising the supply cap at this time for two key reasons. First, the total supply of WETH on Unichain is only 2,022, and the current supply cap has already reached 75% of this amount. Second, WETH’s DEX liquidity remains extremely limited, showing no signs of improvement since our last assessment. Currently, a 6 WETH sell incurs an 8% price slippage, indicating that liquidity constraints could hinder liquidations in stressful market conditions. Given these factors, we recommend against a supply cap increase at this time.
USDC (Unichain)
USDC’s supply cap utilization stands at 88%, while its borrow cap utilization has reached 96%.
Supply Distribution
The supply of USDC is well-distributed, with all top suppliers borrowing USDC itself, significantly reducing liquidation risk.
The largest borrowed asset against USDC is USDC itself, accounting for 85.7% of the total distribution.
Recommendation
Given user behavior and on-chain liquidity, we recommend increasing to supply cap to 4.3M USDC and borrow cap to 3M USDC. These values represent 75% of the on-chain supply of USDC.
Specification
| Market | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Unichain | USDC | 3,000,000 | 4,300,000 | 1,500,000 | 3,000,000 |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.