# MIP-R10: Gauntlet's Moonriver Recommendations (2024-01-02)

## Simple Summary

A proposal to adjust 1 risk parameters:

| Risk Parameter | Current Value | Recommended Value |
| ---------------------- | ------------- | ----------------- |
| WMOVR Borrow Cap | 76000 | 40000 |

---
### Rationale:
Gauntlet's risk model estimates VaR at $2.7k and LaR at $57.8k based on current user positions and market conditions. FRAX, WMOVR and xcKSM's collateral factors are effectively balancing risk and capital efficiency.

With the recent appreciation of MOVR and the outflow of MOVR borrow positions from the protocol. Gauntlet has recommended to reduce the borrow cap of WMOVR to 40k. This reduction is meant to help to protect the protocol from the low liquidity within the ecosystem. At this time, users are able to swap 30k of FRAX to WMOVR and 1k ($47k) of xcKSM to WMOVR without incurring slippage greater than 10%. With the current borrow cap valued at $2M, it is prudent to reduce the cap of the protocol.


The Moonriver market experienced a large increase in TVL because of recent asset price appreciation and large inflow of supply to the FRAX LP.


#### Supply & Borrow Balance USD
_{[Link](https://risk.gauntlet.xyz/protocols/moonwell/markets/apollo) to Chart}

#### Supply & Borrow Balance
WMOVR and xcKSM supply slightly decrease in supply during the rally while FRAX supply experienced a large increase. Relative to our last recommendation, supply across all 3 markets have increase. xcKSM and FRAX have experience a 80% and 97% increase in supply, respectively.

#### Collateral Usage

Collateral Usage experienced a large increase during the recent market rally.

<!-- https://app.mode.com/gauntlet/reports/ef3e55d2f114/runs/a8c5b8271015 -->

#### Collateralization Ratios

Weighted average collateralization for assets have increased with relative price appreciation and changes in user positions during the market rally.

### Moonriver On-chain Liquidity
In shaping our recommendations via our risk models, we consistently monitor market liquidity and concentration risks pertaining to the Moonriver protocol. We aim to provide the community with pivotal liquidity metrics for Moonriver assets. Following the Multichain incident, liquidity on the Solarbeam DEX has diminished to levels that are less than optimal.
**Previous Rec**
| Asset | 10% Liquidity Depth (#) | 10% Liquidity Depth ($) | 25% Liquidity Depth | 25% Liquidity Depth ($) |
| ----- | ----------------------- | ----------------------- | ------------------- | ----------------------- |
| WMOVR | 2000 | $14,960 | 6000 | $44,880 |
| xcKSM | 320 | $8,326 | 1000 | $26,020 |
| FRAX | 15000 | $15,000 | 45000 | $45,000 |

**Current Rec**
| Asset | 10% Liquidity Depth (#) | 10% Liquidity Depth ($) | 25% Liquidity Depth | 25% Liquidity Depth ($) |
| ----- | ----------------------- | ----------------------- | ------------------- | ----------------------- |
| WMOVR | 1000 | $22,910 | 3500 | $80,185 |
| xcKSM | 320 | $16,221 | 1000 | $50,690 |
| FRAX | 25000 | $25,000 | 75000 | $75,000 |

Since our last update, liquidity looks to have decreased for WMOVR on token amt but the USD notional has doubled. Liquidity increase for FRAX on Solarbeam. The increase in FRAX liquidity is driven by the price appreciation of WMOVR and xcKSM. Even with this recent market rally, we do not recommend any risk-on actions since underlying liqudity is not supportive for more risk-on measures. We recommend to continue monitoring the Moonriver market and ecosystem.

| Asset | Circulating Supply | Supply Balance | Supply Balance / Circulating Supply | Borrow Cap | Borrow Cap / Circulating Supply |
| ----- | ------------------ | -------------- | ----------------------------------- | ---------- | ------------------------------- |
| WMOVR | 197,575 | 153,570 | 77.73% | 76,000 | 38.47% |
| xcKSM | 68,047 | 49,050 | 72.08% | 11,000 | 16.17% |
| FRAX | 5,450,958 | 1,277,087 | 23.43% | 300,000 | 5.50% |

The circulating supply on the Moonriver market appears to be well-balanced in relation to borrowing caps, indicating there is liquidity within the ecosystem for current market activity.

## IR Parameters
When Gauntlet analyzes interest rate parameters, we prioritize two main objectives:

- Mitigating the risk of reaching 100% utilization in a pool.
- Maximizing the growth of the protocol reserve to provide coverage for potential insolvencies or future expenses.

For this recommendation, Gauntlet advises against making any adjustments to the interest rate curves, as they are already optimized to achieve these objectives.

### Moonwell Moonriver Projected Revenue KPIs

<!--- https://app.mode.com/gauntlet/reports/6ad1070c5c3d --->
<!--- I set the date to approximately 30 days prior to the recommendation--->

### Projected Annual Reserves

## Methodology
This set of parameter updates seeks to maintain the overall risk tolerance of the protocol while making risk trade-offs between specific assets.

Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. Parameter recommendations seek to optimize for this objective function. Our agent-based simulations use a wide array of varied input data that changes on a daily basis (including but not limited to asset volatility, asset correlation, asset collateral usage, DEX / CEX liquidity, trading volume, expected market impact of trades, and liquidator behavior). Gauntlet’s simulations tease out complex relationships between these inputs that cannot be simply expressed as heuristics. As such, the input metrics we show below can help understand why some of the param recs have been made but should not be taken as the only reason for recommendation. To learn more about our methodologies, please see the Helpful Links section at the bottom.

## Supporting Data

The below figures show trends on key market statistics regarding borrows and utilization that we will continue to monitor:

### Top 10 Borrowers’ Entire Supply

*[Link](https://risk.gauntlet.network/protocols/moonwell/markets/apollo?fullscreen=market_health_latest_top_borrowers_supply) to chart*

### Top 10 Borrowers’ Entire Borrows

*[Link](https://risk.gauntlet.network/protocols/moonwell/markets/apollo?fullscreen=market_health_latest_top_borrowers_borrows) to chart*

### Utilization Rate of Assets - Timeseries

*[Link](https://risk.gauntlet.network/protocols/moonwell/markets/apollo?fullscreen=utilization_rate_timeseries) to chart*

### Borrow Cap Utilization

FRAX and xcKSM Borrow Cap usage is at 100%. At this time, Gauntlet will not recommend increasing the caps based on current on-chain liquidity. We will continue monitoring liquidity and consider further risk strategies for the community if the community would want to increase the borrow caps.

### Liquidations on Moonriver

*[Link](https://risk.gauntlet.network/protocols/moonwell/markets/artemis/liquidations) to chart*

During the market rally,there was approximately $40k of collateral liquidated.

## Risk Dashboard
The community should use Gauntlet's [Moonriver Risk Dashboard](https://risk.gauntlet.network/protocols/moonwell/markets/apollo) to understand better the updated parameter suggestions and general market risk.

Value at Risk represents the 95th percentile **insolvency value** that occurs from simulations we run over a range of volatilities to approximate a tail event.

Liquidations at Risk represents the 95th percentile **liquidation volume** that occurs from simulations we run over a range of volatilities to approximate a tail event.

## Quick Links

*Please click below to learn about our methodologies:*

[Gauntlet Parameter Recommendation Methodology](https://medium.com/gauntlet-networks/gauntlets-parameter-recommendation-methodology-8591478a0c1c)
[Gauntlet Model Methodology](https://medium.com/gauntlet-networks/gauntlets-model-methodology-ea150ff0bafd)

*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*