The attached document covers a dynamic framework we developed to propose deposit caps for the Red Bank and Rover. The previous approach [see MRC-35 for details] was static and only on-chain liquidity was taken into account when determining caps. Now we have significantly expanded the methodology to include the dynamics of liquidations and successive recovery of on-chain liquidity. From now on, we’ll use this methodology as a basis for proposing deposit caps within the Red Bank and Rover.
A comparison between the current caps and the caps recommended by this framework will be published at a later date to complement this post.