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# System prepended metadata

title: gmBTC Recommendation

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# gmBTC Recommendation
# Gauntlet Analysis

## Summary

Gauntlet recommends adding gmBTC on the Arbitrum Aave v3 Liquidity Pool. We give further color below.

## Assessment

### Market Cap
Current supply of gmBTC is ~$156M USD.
![Screenshot 2024-02-13 at 6.42.02 PM](https://hackmd.io/_uploads/SyywRuYia.png)
Source: defillama



## Staking Yield

Yield stands at ~26% currently, averages ~20% across the time and seldom tops above 30%.
![Screenshot 2024-02-13 at 6.43.59 PM](https://hackmd.io/_uploads/S1MA0uFi6.png)
Source: defillama

Yield is from fees from leverage trading, borrowing fees and swaps. Below shows BTC market trading volume ($) on GMX V2.
![Screenshot 2024-02-14 at 1.01.10 PM](https://hackmd.io/_uploads/HyJrltcjp.png)




### Slippage and Liquidity

* Max gmBTC which can be sold are $60M~90M. We expect [this sellable amount](https://app.gmx.io/#/pools) to fluctuate. Sell fee on GMX is low. 
* $20M WBTC~USDC pair on Arbitrum creates 5-10% splippage. 


![Screenshot 2024-02-14 at 12.56.45 PM](https://hackmd.io/_uploads/r18e1tqiT.png)

![Screenshot 2024-02-14 at 1.08.20 PM](https://hackmd.io/_uploads/HyusWF9sT.png)



### Recommendations

Considering the liquidity for this asset is concentrated on GMX and is unavailable on other DEXes for liquidation purposes, Gauntlet advises against listing this asset on Aave. Gauntlet's concerns stem from potential challenges liquidators may face in swapping the token to cover undercollateralized positions, given that the asset cannot be swapped atomically. Furthermore, in the event of GMX experiencing downtime, there would be no alternative liquidity sources available.

If the community wants to move forward with listing the asset, Gauntlet recommends the following parameters based on the assets characteristics: 

| Parameter | Recommendation |
|-----------|----------------|
| Isolation Mode | YES |
| Borrowable | NO |
| Borrowable in Isolation | NO |
| Collateral Enabled | YES |
| Stable Borrowing | NO |
| Supply Cap | $10M |
| Borrow Cap | - |
| Debt Ceiling | $5M  |
| LTV | 65% |
| LT | 70%|
| Liquidation Bonus | 10% |
| Reserve Factor | 25% |
| Base Variable Borrow Rate | - |
| Variable Slope 1 | - |
| Variable Slope 2 | - |
| Uoptimal | - |



Gauntlet suggests listing the asset under isolation mode with a debt ceiling capped at $5 million due to concerns regarding the liquidation of undercollateralized positions. Isolation mode would enable users to borrow USDC, allowing them to leverage their gmbtc collateral to pursue higher yields through a recursive strategy.

Furthermore, Gauntlet has decided against making the asset borrowable, citing a lack of business value and potential risks to the protocol.



