Hi everyone, we’d like to propose adding an AAVE-USD perpetual market to the dYdX Chain. Aave is a blue chip DeFi protocol that exhibits strong 24-hour trading volume and solid +/- 2% depth across many exchanges.
Summary
Wintermute is proposing to add AAVE-USD to the dYdX Chain
Motivation & Rationale
AAVE is the native token of Aave Protocol and the Aave DAO. It is the leading lending protocol in the DeFi space with deployments across many chains. It has a market cap of $1.2b and strong daily trading volume. Furthermore, listing AAVE provides depositors in the Aave Safety Staking Module the opportunity to collect yield while hedging their price risk. We think AAVE will be a welcoming addition to the dYdX Chain’s market offerings.
Chaos Labs supports the addition of AAVE-USD to the dYdX Chain and recommends listing under liquidity tier 1. In line with the criteria for introducing a new market as detailed in the v4 documentation, we present our analysis and the rationale behind our recommendation for AAVE’s listing.
Analysis
AAVE is currently listed for spot trading on exchanges including MEXC, Kraken, OKX, Kucoin, Bybit, Gate, Binance, and CoinbasePro, with its launch on October 2, 2020 (CoinGecko). 30d Perpetual volumes for AAVE have also recently been north of $85m, showing a robust market. With an aggregate liquidity of $1.3m within a ±2% range, AAVE’s price stability is deemed robust enough against potential manipulation, qualifying it for listing on the dYdX Chain.
Liquidity Tier Recommendation
AAVE fulfills the requirements for a Long-Tail asset as defined in the dYdX v4 documentation, but it is very close to meeting the requirements for a Mid-Cap asset, and, therefore, we suggest categorizing it under liquidity tier 1.
As outlined in the v4 documentation, liquidity tiers specify the margin requirements needed for each market and should be determined based on the depth of the relative market’s spot book as well as the token’s market capitalization.
AAVE aligns the Oracle requirements: 7 out of 8 Oracle sources demonstrate liquidity greater than $50k on both sides, with Gate only slightly below. Below are the volume and liquidity depth metrics for AAVE:
Given that it nearly meets the Mid-Cap criteria, with only the liquidity from the 8th Oracle source marginally falling short of the $50k threshold, we suggest listing AAVE at a liquidity tier of 1. The established nature of the AAVE token liquidity gives us confidence that this minor relaxation of the liquidity tier criteria does not pose an excessive risk to the dYdX Chain.
Totally supporting this analysis as well as the request to use a tier 1. A listing seems more than appropriate regarding the long lasting history of this asset and his profitability metrics which further strengthen the expected demand for this asset in the foreseeable future.
