Chaos Labs - Risk Parameter Updates - 04/28/25

[chaoslabs]

Summary

A proposal to:

• Increase USDC’s supply and borrow caps on Venus’s BNB Core deployment.
• Increase sUSDe’s supply caps on Venus’s BNB Core deploymen.

USDC (BNB Core)

USDC’s supply cap utilization has reached 90.6%, with 233.8M USDC supplied out of a total cap of 258M.

Supply Distribution

The supply of USDC is highly distributed among top suppliers, minimizing concentration risk. The largest individual supplier accounts for 19.4% of the total supply and maintains a moderately strong health factor of 1.5, indicating a relatively stable collateral position.

Liquidity

USDC is primarily utilized as collateral for borrowing BNB. When examining the BNB-USDC liquidity path, it shows consistent and stable liquidity, indicating healthy on-chain market depth and low volatility risks for borrowers and lenders.

Recommendation

Given the highly distributed nature of USDC supply among suppliers, the absence of significant concentration risk, and the strong liquidity conditions in the BNB-USDC market, we recommend increasing the USDC supply and borrow cap on the BNB Core deployment.

sUSDe (BNB Core)

sUSDe’s supply cap utilization has reached 100% with total of 2 million sUSDe deposited into Venus.

Supply Distribution

Currently, almost all of the supply is provided by a single user, and it is supply-only, which is not unusual given the low current supply cap.

Recommendation

The sUSDe market on Venus’s BNB Core is still in its early stages. Currently, all deposited sUSDe is supply-only, and we do not observe material risk under the current conditions.

Given that increasing the supply cap could help attract additional participation and drive more sUSDe liquidity onto the chain, we recommend raising the supply cap to support the market’s early growth.

Specification

Market	Asset	Current Supply Cap	Recommended Supply Cap	Current Borrow Cap	Recommended Borrow Cap
BNB Core Pool	USDC	258,000,000	360,000,000	200,000,000	324,000,000
BNB Core Pool	sUSDe	2,000,000	4,000,000	-	-

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

[chaoslabs]

Overview

Following the recent volatility of the ALPACA token, we recommend reducing the supply caps to better represent the available liquidity of the asset.

Motivation

The ALPACA token’s price has risen substantially over the last week, from $0.04 to a peak of $0.37, and subsequently dropped 65% in the span of an hour.

This price rise has caused a meaningful outflow from Venus, with its supply decreasing from 350,000 to 100,000, and utilization of the market reaching 100% for a sustained period. While this creates a lack of withdrawal liquidity, it caused a significant spike in the borrowing rate, incentivizing additional deposits.

Over the same period of time, the ALPACA funding rate on Perpetual CEX has spiked to over 2% every 8 hours, or over 2000% annualized.

Meanwhile, the market’s 100% utilization means withdrawal liquidity is severely constrained for the users supplying the market and for the liquidators. Liquidations are unlikely to be performed because of the time risk involved.

As such, the current top supplier of ALPACA, which maintains a $4000 collateral position and a $2500 USDT borrow position, is currently eligible for liquidation. However, the market’s 100% utilization means that the position cannot be liquidated at the moment. Given the conservative LT of the asset, the position is safe from accruing bad debt. This user represents the aggregate borrow against distribution within the market, as observed below, minimizing outstanding collateralized debt.

ALPACA’s top borrow position is collateralized with USDT, and it maintains a health score of 5, ensuring no bad debt can be caused.

However, given the asset’s high volatility, the dollar value of the supply caps has fluctuated significantly over the last week.
To ensure that liquidations remain profitable following drastic changes in DEX liquidity, we recommend reducing the supply cap of ALPACA on the Venus BNB Defi instance to 200,000 ALPACA.

Specifications

Market	Asset	Current Supply Cap	Recommended Supply Cap	Current Borrow Cap	Recommended Borrow Cap
BNB DeFi	ALPACA	1,500,000	200,000	100,000	-

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.