Increase the USDC borrowing limit on USDAERO to 12.000.000

Good evening all,

I would like to put the following to a vote:

• Increase the USDC borrowing limit on USDCAERO to 12.000.000

Please note the below applies to other USDC pools as well; this is just the most pressing instance.

As of right now there is USDC ~13m being supplied with a borrow of USDC ~11m. Supply is however not the problem, artificially restricted demand is. As a veExtra holder (so 95% limit) there is not a single pool I am able to leverage with USDC, because of arbitrary low max borrow limits on individual pools.

Real demand however, is overwhelming: as someone who checks the USDC/AERO pool would notice. On the off chance either USDC or AERO drop beyond their respective limits you probably have less than a minute before any amount is scooped up. Increasing USDC borrow limits would (not going out on a limb here) automatically increase supply USDC as interest rates react accordingly. Needless to say this would greatly increase revenue for the protocol while at the same time alleviating user frustration.

Imagine a prospective 'user' with 80% limits stumbling onto a 'leveraged' farming platform only to find out there is no actual leverage to be had. This is severely handicapping the growth prospects of Extra.

There have been several votes already on increasing USD borrow limits which have passed with >98% of votes; these have been straight up ignored by the team citing 'risk limits'. If this is the policy I suggest dropping the whole governance charade. Instead I would like to discussing the reasoning behind these decisions, taking into account the following:

1. From a risk perspective, does it make sense to limit stablecoin borrowing to $8m, while the volatile coin is limited to 12.1m? The absence of USD here is intentional as the limit is 12.1m AERO. In admittedly, what seems like ages ago, this was a notional of over $25m. And, as most short sellers are aware, the potential liability is infinite;
2. It seems to me the liquidation protocol is actually working quite well; unfortunately I have been a repeat customer. Considering the past few days have been quite volatile could the team shine some light on the amount of bad debt as a result of this? Focusing purely on USDAERO and not on some memecoin bribing a million out of nowhere (warning sign?)
3. Personally I am both long and short AERO for as close as I can get to 4x within the current framework (NFA). However on both positions you could drive a truck between the last price and my liquidition price. And even then the liquidation protocol has about 20% margin of safety. Is there a rational argument why Extra can't be more than X percent of TVL locked on AERO? Apart from the fact that most crypto has no intrinsic value; I would argue the CB backing would at least put a floor beneath the price. Also, without AERO / VELO Extra wouldn't even exist. As noted the liquidation protocol works quite good in preventing cascading liquidations.
4. Lenders are rational participations in the financial markets as well. With the exception of too big to fail banks but thats another story. If lenders feel like they are not being compensated adequately for credit risk, they are free to put their 'virtual USD' someplace else. I hear T-bills actually have a pretty good yield nowadays (sorry TradFi couldn't resist).

TLDR: don't try to meddle too much in capital markets. Specifically I think the current situation is sub-optimal for farmers, lenders and stakers - which by definition also includes you as the de facto 'owners' of the protocol.

Interest to hear your feedback and the community as well. Apologies for the wall of text but I just couldn't get this image out of my mind :)