Summary
This proposal seeks to unpause the INV market on FiRM and increase its market ceiling from 420k to 500k. The RWG previously enacted its guardian role to pause any new loans occurring in the INV market on September 10, 2024, citing poor market conditions and the need for ongoing assessment. Improved market sentiment and asset health indicators observed over a long period now support reactivating the market with an increased ceiling.
Background
On September 10, 2024, the RWG paused the INV market to mitigate potential risks stemming from adverse market conditions. At the time:
- While liquidity levels were still sufficient to ensure market safety, allowing the facilitation of liquidations in the event of a very high gas or cascading environment was increasingly at risk according to our models.
- Important to note that Borrow supply was near its limit, and any expansions to the market required governance approval at the time of pause in any case.
The pause had no impact on open positions and thus required no immediate action; rather it allowed for closer monitoring and ensured no new borrow positions could be opened.
Analysis
The RWG’s models now indicate that:
- Liquidity Levels Have Improved:
Market Liquidity had greatly improved allowing for healthy liquidation support. Repayments during this period have brought the market debt down to $380k from $415k, offering room for increased debt.
Liquidity TVL
| Curve | 9/10/2024 | 12/7/2024 |
|---|---|---|
| TricryptoINV | $800,822 | $1,250,000 |
| TriDBR | $1,010,000 | $2,090,000 |
- Asset Health Indicators Have Strengthened:
Asset scoring metrics reflecting market cap, trading volume, and price volatility, taken from Inverse.Watch show a marked improvement across multiple categories since the market’s pause.
Asset Score
| Inverse.Watch | 9/10/2024 | 12/7/2024 |
|---|---|---|
| MCS | 0.41 | 0.58 |
| TVS | 0.15 | 0.13 |
| PVS | 4.23 | 5.19 |
| TDS | 6.83 | 7.28 |
- Market Sentiment is Favorable:
The conditions that necessitated the market pause no longer apply, and expanding the market ceiling aligns with current data.
Motivation
Reactivating and expanding the INV market aligns with Inverse Finance’s goals to enhance protocol utility and respond to evolving market conditions. By doing so, we aim to:
- Provide greater borrowing opportunities for users.
- Optimize INV token utilization while maintaining market safety.
- Leverage improved liquidity and sentiment to increase market participation.
On-Chain Actions
- Unpause the INV market on FiRM
- Set INV Market Ceiling to 500,000