Bear market risks

Hi all,
Now with Genesis on the brink of insolvency there is a real risk that this will trigger a chain event of liquidations…again
With Circle (USDC) having deposits in Silvergate Bank and they are already taking hits because of the FTX fiasco, now there are reports DCG (mother companie of Genesis) invested money into Circle to help with USDC.

I understand the mechanism of GLP loosing value due to crypto loosing value but what would or could happen with our liquidity pool, should USDC loose its peg (worst case) ?
DAI for example already lowered its exposure of USDC some time ago since they deemed it too centralized.

Maybe we can establish a discussion about the already known and potential insolvencies and how those would effect GMX / GLP.
It feels like it is a full time job to just keep up with all the insolvencies and contagions now, so hopefully this thread can help every Berry to get informed.


I wonder if the hacker that is holding ETH and selling into the market is leverage shorts here to gain on the way down.

I like the proactive thinking here. Are you thinking to add Dai and lower over all use of USDC?

Well, USDC is the best we have.
We can reallocate come reserves into DAI, other than than we can’t do much.
There are also stable like BUSD and LUSD, both not widely use on Arbitrum.
If Binance issues BUSD on Arbitrum and turns on direct deposits and withdrawals, it would be a good catalyst to reallocate a part of GLP pool into BUSD

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The proposed solutions here are replacing USDC for Dai? What does replacing one stable for a different stable that uses the prior as collateral achieve? Personally, I see very little chance of USDC experiencing peg issues, but even if I did, Dai would be one of my last choices to replace.

DAI as a whole only had USDC as a certain percentage correct? I would say that USDC gives me the most confidence and I think the discussion is still a good idea.

I wanted to start a discussion, because maybe other people have more knowledge than me or understand the GLP pool better.
I do not want to necessarily exchange USDC for DAI. i found Silvergate Bank on USDCs deposit list and my alarm bell went off, since Silvergate apparently has ties with FTX.
At the same time i understand USDC is one of the most used stables and helps generate fees. That does not mean to use it blindly though.

Correct, but DAI lowered its exposure to it as they think it is too centralized for DAI as they strive for decentralization.
I like USDC and BUSD as they both claim to be 100% backed, but i also see the risk of centralized entities telling us “the reserves are safe”.
USDC is audited by Grant Thornton LLC, a pretty big player. BUSD is working with Paxos and Paxos is working with the New York State Department of Financial Services.
I do have some trust in those but at the same time do not really know what would happen to GLP should anything go wrong with USDC

Shouldnt there also be discussion about USDT risk?

Definitely! i personally do not hold any USDT since i cant find any evidence it being 100% backed.
i think the highest i ever saw was 90% backed, but could have changed in the meantime.

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Agree. Exactly the same opinion :100:

if we did ever want to further limit USDT exposure or even remove it outright, here’s some relevant data for USDT liquidity on Arbitrum and Avalanche below:

Arbitrum total chain stablecoin split today: 68% USDC dominance, tether at a distant ~18%, followed by Dai/Frax/Mim (collectively ~10% of stables on Arbi). source: defillama

Avalanche total chain stablecoin split today: 53% USDC dominance, tether at ~39%, followed by Dai/YUSD/BUSD (collectively ~6% of stables on avax). source: defillama

Arbitrum GLP pool split

Avalanche GLP pool split

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