- Risk premiums and Maximum debt ceilings are based on Liquidations 2.0 which is in rollout right now
- Negative competitive rates are mostly due to liquidity mining rewards at Compound & Cream and due to rates and rewards accrued on deposited collateral
- Lending products between secondary lenders and MakerDAO are not standardized and therefore rates can not be strictly compared.
During the past month, Aave began a liquidity incentive program covering primary stablecoins, WBTC, and ETH. This has lead to a substantial decrease in borrowing rates on Aave v2 and has pushed down the overall competitive rate landscape
Despite the bullishness surrounding ETH, rates on centralized lending or trading venues seem to be trending downward as share of leveraged long positions was overtaken by increasing net short positions in ETH at Bitmex. Similarly data from Binance show that funding for ETH perpetuals decreased recently, suggesting that leveraged long ETH positions have lost some steam.
Source: Bitmex ETH longs
Source: Binance ETHUSDT Perpetual Swap (annual funding rate)
- Decrease SF from 3.5% to 3%
Although risk metrics on ETH vaults improved in general with increased collateralization ratio metrics, lower on-chain slippage and Liq 2.0 implementation, we still want to promote higher usage of safer ETH-C vaults as overall exposure to ETH in Maker’s portfolio is growing.
- Increase SF from 2% to 5%
linefrom 5 MM to 1 MM
KyberDAO is currently in a migration process from the current KNC-token to a new one. The liquidity for the KNC will very likely dry out at some point and we don’t see any reason to wait any longer, so we suggest pushing for the vault-owners to unwind their positions now. Note that there are only 11 vaults remaining having approximately 50.000 DAI debt in total.
Please note, that there is also a Signal Request about the future of KNC-A.
- Increase SFs from 0% to 1%
- Decrease DC for PAX-A from 100 MM to 0
Utilization of TUSD-A hasn’t changed a lot since the DC has been set to 0. For PAX-A - where liquidity is really low - we have seen a substantial increase in utilization in the last weeks as users tend to use PAX-A vault to farm with DAI since PAX on-chain farming is limited. We want to encourage vault-owners to close their position (which is essentially a free short position on DAI). Later on - with Liq 2.0 - we are able to liquidate these positions in a more controlled manner, so the threat of vault-owners abandoning their vaults is not existing anymore. In case vault owners don’t unwind their positions, we may however accrue some fees from vaults going below 100% CR, but the amount estimated is small (max 25.000 DAI per month).
- Decrease DC from 30 MM to 0
USDC-B was planned as a last resort when PSM is fully utilized and we see a liquidity crunch during liquidations. With Liq2.0 the risk of a lack of DAI-liquidity is a lot lower since a vault-liquidation can happen in a single TX thanks to flashloaning, so there is basically no need to keep this tool.
We considered raising the ETH-A SF by a small margin, since we believe users are very insensitive to small rate changes in the current environment. Additionally this would also further incentivize migration to ETH-C. However the decision was made not to make any changes, since we still have a substantial inflow of USDC into the PSM and still want to encourage further increase in DAI supply to meet increased demand.
We have seen a rather big liquidation on ETH-B last week which went pretty well and produced a nice income to the protocol. At a first glance this could be seen as an indicator that even with Liq 1.2 we are in a pretty safe spot. However, this liquidation did not happen during a big market drop and would probably have had a different outcome if this would have happened during a real market crash.
We suggest playing it conservatively, so we decided against raising the
line for ETH-B until we have some proof that Liq2.0 works significantly better than the current system. The currently running executive will move ETH-B to Liq 2.0 - if this passes we will hopefully have some more data at the next regular MOMC-Meeting in the beginning of June to revisit this topic.
The APY for liquidity providers is still really high so we could easily increase the SFs - but since Uni V3 is about to launch tomorrow we decided to just wait how this evolved in the next weeks.
Proposed Parameter Changes will get included into next week’s on-chain poll on 2021-05-09T22:00:00Z, and if passed will be included in an executive vote on 2021-05-13T22:00:00Z.