@CurveFinance’s crvUSD rate volatility isn’t a peg problem. It’s a rate dynamics problem. Despite heavy flow through yield venues, the peg has held strong. The real issue is volatile rates driven by fast PegKeeper debt shifts, not price deviation. We’ve analyzed the root cause of this volatility and explored whether rates can be smoothed without weakening borrower-driven peg defence. Using onchain data and backtests, we examined how borrowers actually respond to different rate regimes and tested a proposal to smooth PegKeeper debt contribution using an EMA. The goal: reduce unnecessary rate swings while ensuring rates still reach levels where borrowers historically act during stress. The result is a pragmatic configuration that meaningfully improves rate stability without dulling the system’s core feedback loop. Details, data, and recommendation below 👇

2 / crvUSD Rate Volatility: how can we reduce volatility without weakening the peg? Despite large volumes flowing through @yieldbasis, crvUSD’s peg has held remarkably well — but rates have been volatile. At LlamaRisk, we analyzed the root causes and how to smooth the rates without compromising peg stability.

3 / crvUSD rates are driven by two terms: • price deviation • PegKeeper debt fraction In practice, PegKeeper debt is the dominant contributor to rate volatility. When PKs defend the peg, rates swing hard.

4 / Proposal: apply an EMA to pk_debt / total_debt to smooth rates. Trade-off is explicit: • smoother, more competitive rates • slower borrower response → weaker mint-market peg defence

5 / Looking at real behaviour yielded very interesting insights: • Borrowers mostly open positions below ~3.25% APR • Borrowers mostly repay above ~11.25% APR

6 / Backtests show: • 21-day EMA → much smoother rates, but never reaches repay-active levels • 4-day EMA → reaches critical repay bands, but remains volatile • 9-day EMA → middle ground To ensure rates still reach historically active borrower zones under stress, rate0 must be increased to re-anchor the overall rate curve.

7 / Recommendation • Start with a 9-day EMA + higher rate0 (12.24% APR) This configuration meaningfully reduces rate volatility while preserving borrower-driven peg defence, striking a pragmatic balance between stability and responsiveness.