[Signal Request] Adjust WBTC-A DC-IAM-line, october 2021

Overview

Demand for WBTC-A vaults has risen sharply in the last couple of weeks. According to makerburn, we will hit the max debt ceiling (line) within just about two weeks.

Currently we have ~500 MM DAI from WBTC-A. If we continue at our current pace, we will hit the current line of 750MM DAI in ~15 days. Since the governance process does take some time (one week for the Signal, one week for the onchain poll, another week for the exec), it is about time to think about adjusting the line for WBTC-A.

Changing the line for WBTC-A

Last time WBTC-A line was increased, concerns were raised around us having already sucked up ~10% of all WBTC. Today we are at ~11%. Block Analitica shows that a raise to 1 BN is safe, and I’ve been informed by Risk that a line somewhere between 1 BN and 1.5 BN should be fine.

Pros:

  • more fees collected
  • more DAI in circulation
  • we can keep up with the demand on DAI-from-WBTC-A

Cons:

  • keeping too much WBTC as collateral might be problematic with regards to on-chain liquidity during liquidations in times of aggressive market pullback

Please vote for all options you would support in an onchain poll.

  • 750MM (no change)
  • 1000MM (+ 250MM, 33%)
  • 1250MM (+ 500MM, 66%)
  • 1500MM (+ 750MM, 100%)
  • Abstain

0 voters

Next Steps

The Poll will run until 2021-10-21T16:00:00Z. its outcome will either result in an on-chain-poll assuming the outcome of the poll deems it necessary or its intermediate results are going to be taken to another initiative - another signal, onchain-poll or urgency executive.

11 Likes

thanks @makerburn for pushing this, great SR format as well ;-p

3 Likes

Can confirm the 1.5bn max DC suggestion by our team. According to our model 1/4 of vaults are medium to high risk (not actively protecting themselves) and by using this metric in the risk model we simulate a “healthy” 5.5% risk premium for 1.5bn. This amount risk is still undercompensated by the current stability fees though.

9 Likes

I have AAVE cost to borrow DAI on wBTC at -1.16% (net deposit return), 7.04% (cost to borrow minus returns) at 5.88% vs. Maker at 2%

COMP returns for deposits of wBTC and borrows of DAI but the net difference in 4.43-.19 = 4.24% + wBTC, DAI comp returns .33 wBTC deposit, 1.61% DAI borrow net borrow rate 2.3%.

I was trying to figure out effective kashi rates here but the rate to borrow DAI on the wBTC-DAI pool seems extreme at 60%.

Given the increase in demand and the following comment:

It seems prudent to at least test the waters and when doing a DC increase, increase the SF from 2-2.5% at the same time to see if this even puts a dent in growth trajectory.

My read from the two markets above is that the markets should be able to handle a .5% SF increase.

4 Likes

Ceiling increase of 750 MM was included in the Mid-month Parameter Changes Proposal and is now posted to an on chain poll.

4 Likes

On chain poll passed and moves on to an executive this friday.

2 Likes

Executive including this proposal is now live: https://vote.makerdao.com/executive/template-executive-vote-parameter-changes-wsteth-a-onboarding-october-22-2021?network=mainnet#proposal-detail

Please vote to show your support!

4 Likes

Executive has now passed and will be in effect within the next few days.

Thank you all for participating!

3 Likes

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