Risk Management Update for January 6, 2023

Welcome to the first edition of the Risk Management Update for 2023! Let’s get right to some protocol metrics, vault updates, and what’s new at the QiDao Risk Matrix.

Collateralization Metrics

As the overall market sentiment has been relatively flat over the past four weeks since our last update, we’ve seen little movement in MAI collateralization metrics. Stable vs volatile vault collateral breakdowns remain relatively flat with stable vaults accounting for 37% of MAI backing, and volatile vaults accounting for 63%.

We have seen some changes in our backing by chain, though the top four networks still remain the same with Polygon in first place at 54% (up from 52%) of backing and followed by 20% (flat from last month) for Fantom. Ethereum vaults have made a positive move since last month, moving from 8.4% of backing to 9.6%, overtaking Optimism with a clear lead as the L2 chain dropped from 8.5% to 5.9%. The launch of the new interest bearing vaults on Optimism saw debt moving out of the previous top debt holders, Beefy Aave ETH and Beefy Aave WBTC, and into the new vaults, though the MAI peg being just below threshold for the past few weeks has prevented the expected explosive growth of the new vaults. More on this later.

The most interesting bit of news for this section is the reduced risk grading for BNB Chain collaterals, particularly BNB and CAKE. The reduced grading stems from the increased price volatility of the tokens, possibly caused by market weariness regarding Binance’s solvency as a result of recent market events related to FTX. This contagion appears to have largely evaded volatility for decentralized assets with most remaining relatively flat over the past several weeks even as new information comes out on the insolvency of centralized entities.

The big winner once again here is Polygon as our largest vaults continue to be on the Polygon network with the top half of Polygon vaults accounting for 78% of overall MAI backing on the chain.

MAI volume has been relatively low over the past few weeks, but price volatility remains extremely stable, hovering below 0.0017 over the past eight weeks.

Debt Ceiling Recommendations

Pending review of the MAI peg on each chain, we recommend increasing the debt ceilings on the following vaults to meet demand. Vaults are listed in no particular order.

  1. Beefy Curve wstETH/ETH (Optimism)
  2. Tetu xxLink (Polygon)
  3. Yearn Curve.fi ETH/stETH and StakeDAO Curve.fi ETH/stETH (Ethereum)
  4. Wrapped Liquid Staked ETH (Optimism)
  5. **Wrapped MATIC **(Polygon)

The Vault Watchlist

No suggested changes from the previous update for vault deprecations, so please refer to the previous update for a full list.

Website Updates

No major updates have been made to the site as we have focused mostly on bug fixes and performance improvements over the last few weeks.

With that said, we have begun work on tracking QI analytics and plan to add the data to the public facing dashboard over the new few weeks. Some initial protocol revenue tracking metrics will go live at the same time as long as there are no major blockers.

If you’d like to get in touch, find us on Twitter, @qidaorisk or on QiDao’s Discord.

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