JLP Weightage Parameter Update May 4th, 2025

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Recommended Changes

With this update, we will deprecate USDT, ahead of schedule, as the utilization rate has fallen rapidly to almost zero. The current 4% weightage of USDT will be fully transferred to USDC. Another critical change in this parameter update is reducing ETH’s weight in the JLP Pool. BTC allocation will benefit from these proposed changes.

The current utilization landscape is provided below:

utilization
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Effects on the Borrowing Rate

The following changes align with the USDT deprecation and the efficient utilization of funds by shifting some weightage from ETH to BTC. While this adjustment introduces specific risks, such as reduced revenue from borrowing fees if trading volume does not increase proportionally, and heightened volatility from increased delta exposure, the benefits should outweigh the risks.

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Reallocating funds from ETH to BTC would lower BTC long borrowing rates at the same OI levels. The following analysis is conducted ceteris paribus.

As of April 30th, 2025, the BTC borrowing rate is 0.0015%, or 13.37% annually. The value allocated to BTC is approximately 185.5M, and JLP TVL is 1.52 B. The current BTC weightage stands at 12.24%, already above the target weight of 11%. The increase from 11% to 13% in BTC weightage would bring the borrowing rate to 13.28%, an almost negligible reduction.

The ETH borrowing rate is 0.0013%, or 11.16% annually. The value allocated to ETH is approximately 150.7M, and JLP TVL is 1.52 B. The current ETH weightage is 9.94%, below the target weight of 10%. A decrease from 10% to 8% in ETH weightage would bring the borrowing rate to 11.41%, a minor increase.

Given the low utilization of stablecoins, the increase in USDC weightage is expected to produce no visible changes to the borrowing rate.

Conclusion

This reallocation aims to drive growth within the Jupiter protocol by enhancing JLP returns through increased trading volumes. It also increases JLP’s long exposure, which aligns with potential LP preferences, as actual long exposure is below expectations relative to JLP’s target distribution.

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Hello, I think product updates like this, even if significant changes aren’t expected, need to be tweeted out via the official Jupiter Twitter account. Like you said, the change in risk parameters might have a notable effect on revenue if trading volume doesn’t increase at a proportional rate. Not many people get on this forum atm.

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Good update write up, sometimes it’s subject to market condition of BTC.