Increase USDC and USDT PegKeeper Debt Ceiling to 50m crvUSD Each

Proposals
#1

Summary:

Increase USDC and USDT PegKeeper debt ceiling to 50m crvUSD from 25m.

Abstract:

Both PegKeepers are set to a debt ceiling of 25m, targeting the USDC/crvUSD and USDT/crvUSD pool, respectively. This proposal will increase the ceiling to 50m each, allowing them additional liquidity to balance the target pools and protect against an upward depeg.

Motivation:

The USDT and USDC PegKeeper pools are the primary drivers of crvUSD stability, activating when excess demand for crvUSD leads to imbalance in the target pools. With the recent launch of Resupply, it allows users to leverage supply crvUSD to LlamaLend markets. High reward potential with leverage on crvUSD has initiated a period of heightened crvUSD demand. The supply of crvUSD has increased substantial, mainly from PegKeeper debt.

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During periods when PegKeeper debt makes up a larger share of overall debt, rates to mint crvUSD drop substantially, in this case to near zero- incentivizing borrowers to mint crvUSD.

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This is especially true when PK debt is over 10% of the overall crvUSD debt. See below that the debt from PegKeepers has been consistently above this threshold since February 25.

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While this dynamic between PegKeeper debt and mint market rates should equilibrate the proportion of crvUSD minted by borrowers and by PegKeepers (i.e. lessen the reliance on PegKeepers), there may be a delayed reaction by market participants, as has been the case over the past month. Therefore there may be need for additional PegKeeper debt to support crvUSD stability during prolonged periods characterized by high reliance on PegKeeper debt.

Note that, at time of writing, the PegKeeper Debt is 32.62m of 65m, or 50% of the total PegKeeper debt ceiling.

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Specification:

CONTROLLER = '0xC9332fdCB1C491Dcc683bAe86Fe3cb70360738BC'

ACTIONS = [
    # USDC debt ceiling 50m crvUSD
    (CONTROLLER, "set_debt_ceiling", "0x9201da0D97CaAAff53f01B2fB56767C7072dE340",  50000000000000000000000000),

    # USDT debt ceiling 50m crvUSD
    (CONTROLLER, "set_debt_ceiling", "0xFb726F57d251aB5C731E5C64eD4F5F94351eF9F3",  50000000000000000000000000),
]
#2

This vote is live here:

#3

This vote appears that it may not reach quorum and will not be enacted. LlamaLend market borrowers should be aware of the oracle used in each LlamaLend market, as the oracle type can influence the market’s sensitivity to changes in crvUSD price. This is particularly important to understand in current conditions where demand for crvUSD has increased from the introduction of scrvUSD several months back and now Resupply protocol launch. While PegKeepers have never reached their debt ceiling, the outcome of such condition would likely result in crvUSD rising above its peg. Depending on the speed and severity of an upward depeg, LlamaLend market positions may enter soft liquidation and may become at risk of hard liquidation.

See below a chart of the predominant LlamaLend markets on mainnet and their respective oracle configuration. Markets that use the oracle CryptoFromPool and CryptoFromPoolsRate rely on a single Curve pool or chain of Curve pools to denominate pricing in collateral/crvUSD. This configuration exposes borrowers to crvUSD pricing risk specific to the constituent pools, and are more sensitive generally to fluctuation in stablecoin pricing. Newer pools have been instantiated with the CryptoFromPoolsRateWAgg, CryptoFromPoolVaultWAgg, and CryptoFromPoolWAgg implementations that combine the underlying pool price oracle with the aggregate price of crvUSD across multiple PegKeepers. This pricing method is more resilient to transient price spikes, although a sustained upward crvUSD depeg will reflect in the LlamaLend market oracle. This means, while newer LlamaLend markets are less likely to be affected by transient crvUSD depegs, borrowers may enter soft liquidation or become at risk of hard liquidation if crvUSD experiences a sustained upward depeg and their position is high LTV.

Market Oracle Pool vault agg
WETH2 CryptoFromPool 0x4eBdF703948ddCEA3B11f675B4D1Fba9d2414A14
CRV CryptoFromPool 0x4eBdF703948ddCEA3B11f675B4D1Fba9d2414A14
tBTC CryptoFromPool 0x2889302a794dA87fBF1D6Db415C1492194663D13
WETH CryptoFromPool 0x4eBdF703948ddCEA3B11f675B4D1Fba9d2414A14
wstETH2 CryptoFromPool 0x2889302a794dA87fBF1D6Db415C1492194663D13
sUSDe-v2 CryptoFromPoolsRate 0x57064F49Ad7123C92560882a45518374ad982e85
WBTC CryptoFromPoolsRate 0x7F86Bf177Dd4F3494b841a37e810A34dD56c829B, 0x4DEcE678ceceb27446b35C672dC7d61F30bAD69E
pufETH CryptoFromPoolsRate 0xEEda34A377dD0ca676b9511EE1324974fA8d980D, 0x2889302a794dA87fBF1D6Db415C1492194663D13
ynETH CryptoFromPoolsRateWAgg 0x19B8524665aBAC613D82eCE5D8347BA44C714bDd, 0x2889302a794dA87fBF1D6Db415C1492194663D13 0x18672b1b0c623a30089A280Ed9256379fb0E4E62
sDOLA CryptoFromPoolVaultWAgg 0x8272E1A3dBef607C04AA6e5BD3a1A134c8ac063B 0xb45ad160634c528Cc3D2926d9807104FA3157305 0x18672b1b0c623a30089A280Ed9256379fb0E4E62
sFRAX CryptoFromPoolVaultWAgg 0x0CD6f267b2086bea681E922E19D40512511BE538 0xA663B02CF0a4b149d2aD41910CB81e23e1c41c32 0x18672b1b0c623a30089A280Ed9256379fb0E4E62
sfrxUSD CryptoFromPoolVaultWAgg 0x15e4ff94B70a8F146b4e4aFD069014d126035752 0xcf62F905562626CfcDD2261162a51fd02Fc9c5b6 0x18672b1b0c623a30089A280Ed9256379fb0E4E62
USDe CryptoFromPoolWAgg 0xF55B0f6F2Da5ffDDb104b58a60F2862745960442 0x18672b1b0c623a30089A280Ed9256379fb0E4E62

See below the trajectory of crvUSD aggregated price, noting that scrvUSD was introduced in November 2024. Since then, the peg has improved substantially.

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PegKeeper debt as a percent of total debt is an important metric that informs crvUSD borrow rates and indicates the relative reliance on PegKeepers. Since crvUSD achieved a strong peg in January, PegKeepers have become very active. Note that PegKeepers tend to rise sharply when activated, indicating significant market events that require the rapid deployment of crvUSD liquidity to maintain stablecoin stability. With the combined supply sinks from scrvUSD and Resupply, PegKeeper reliance is likely to remain high and may make more volatile moves going forward.

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For more information about crvUSD upward depeg events, there was an event that happened in June 2024. LlamaLend market borrowers are encouraged to review the Incident Report we published following the event: