Please see below to view Gauntlet’s recommendations to support the Venus community in combatting the concerns of added risk due to the USDC Depeg. Gauntlet has recommended pausing Aave markets and pausing borrowing for Compound markets based on the de-pegging of USDC. However, the protocol-specific dynamics of Venus are different on several vectors. At this moment, we do not recommend pausing the Venus market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.87, we recommend pausing the market.
If USDC’s price falls below $0.87, Gauntlet is recommending that Venus should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.
Estimated total liquidations since USDC’s depeg: ~$800k. We observe and estimate that these liquidations did not result from the recent depegging of USDC, but rather from price declines in BTC and LTC.
No significant new insolvencies have been observed since USDC’s depeg.
Next Steps:
We will continue monitoring USDC and Venus markets and provide updates or recommendations as needed.
DISCLAIMER: Gauntlet does not manage or quantify depeg risk as we do not have visibility into USDC centralization risks. Instead, we are providing context in response to a potentially impactful exogenous event.
At this moment, we do not recommend pausing the Venus market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.87, Gauntlet recommends that Venus pauses USDC new borrowing and supplying, and pausing liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.
Overview
USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple markets. Liquidity for USDC is still far below normal levels. We worked with the the Venus core team to suggest next steps.
Key Metrics
Key Risks
1 - Price dip and recovery
If the price dips and recovers, liquidations will only process on the way up. Rational liquidators will not take on USDC collateral until they are confident they can unload it. This is exactly what we saw play out in the last dip on Friday on other protocols - you only get adverse liquidations
Many Defi participants expect USDC to eventually recover to close to a dollar. If USDC price drops below 0.87, adverse liquidations could exacerbate insolvency in markets like Venus. If we see the price of USDC drop to 0.87 cents again, we recommend pausing USDC new borrowing and suppying, and pausing liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations
2 - Price stabilizes at a lower level
In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels.
* This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date
In our previous update, Gauntlet communicated that we do not recommend pausing additional markets, unless the price of USDC dropped to $0.87. This recommendation remains.
Additionally, the Treasury, Federal Reserve and FDIC have stepped in to insure the deposits for SVB and Circle’s other key banking partners. In the meantime, we will continue monitoring and driving the other initiatives below.
Overview
USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple markets. Liquidity for USDC is still much below normal levels. We worked with the the Venus core team to suggest next steps.
Key Metrics
(2% DEX price depth)
Key Risks
1 - Price dip and recovery
At the moment, we do not recommend pausing the Venus market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.87, we recommend pausing the market.
If USDC’s price falls below $0.87, Gauntlet is recommending that Venus should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.
Estimated total liquidations since USDC’s depeg: ~$1.70m in supplied tokens, ~$1.59m in borrows.
Of these, $607k of supplied USDC was liquidated for ~$400k in borrowed USDT and ~$270k in borrowed BUSD.
On March 12, when USDC began to recover, about $76k of borrowed USDC was liquidated.
No significant new insolvencies have been observed since USDC’s depeg.
2 - Price stabilizes at a lower level
In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels. In this case, the protocol will suffer a loss, but there is little to do here except freezing the stablecoin market.
* This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date
In our previous update, Gauntlet communicated that we do not recommend pausing additional markets, unless the price of USDC dropped to $0.87. This recommendation remains.
Additionally, the Treasury, Federal Reserve and FDIC have stepped in to insure the deposits for SVB and Circle’s other key banking partners. In the meantime, we will continue monitoring and driving the other initiatives below.
Overview
USDC recently broke from its $1 peg and prices dropped as low as $0.88. When this happened, liquidations began to fail on multiple markets. Liquidity for USDC is still much below normal levels. We worked with the the Venus core team to suggest next steps.
At the moment, we do not recommend pausing the Venus market since our analysis indicates relatively low insolvency risk given USDC collateral factors and usage. If the USDC price falls below $0.87, we recommend pausing the market.
If USDC’s price falls below $0.87, Gauntlet is recommending that Venus should pause USDC new borrowing and supplying, and prevent liquidations of accounts supplying USDC in order to prevent significant insolvent liquidations.
Estimated total liquidations since USDC’s depeg: ~$1.77m in supplied tokens, ~$1.65m in borrows. Of these, $607k of supplied USDC was liquidated for ~$400k in borrowed USDT and ~$270k in borrowed BUSD. On March 12, when USDC began to recover, about $76k of borrowed USDC was liquidated.
No significant new insolvencies have been observed since USDC’s depeg.
2 - Price stabilizes at a lower level
In the case that the price falls and stabilizes well below a dollar, we do not expect liquidations to process normally given current liquidity levels. In this case, the protocol will suffer a loss, but there is little to do here except freezing the stablecoin market.
* This is the current best guess for when we will get clarity on USDC value - we will monitor and provide recommendations as necessary beyond that date
Moving forward, we will be providing the community with updates on USDC Market risk as needed as opposed to daily.
USDC aggregate liquidity (across CEX and DEX sources) has recovered. Prior to the depeg, USDC’s -2% depth was around $287m; during the depeg, it fell to around $100m, and now it is $293m.
USDC has been stabilizing in price
Venus continues to have no new insolvencies due to USDC risk
