This seems to me to be an attempt to reestablish the iUSD peg by squeezing out people by changing the CDP parameters in the middle of the game. Considering the MCR has already been adjusted once not too long ago and failed to accomplish the task already, I’m not sure there’s any reason to believe that increasing it again accomplishes what this recommendation sets out to accomplish.
It just looks like a way to liquidate people. And it’s apparently in danger of becoming a habit. I can’t help but wonder what’s to prevent cannibalizing debt holders every time iUSD falls below the peg. People will be even less incentivized to hold iUSD if they have to consider the possibility of having the CDP limit increased arbitrarily because some folks can’t appreciate volatility in a free market.
I don’t personally see the volatility as a problem long term. It makes sense that people will mint more iUSD loans as their collateral value increases (as the ada/usd pair rises) and then sell iUSD for ada, CNTs and whatnot looking for pumps. It also makes sense that they’ll buy back into iUSD at a discount to close out CDP positions after they’ve taken profits. We just haven’t reached that point in the cycle yet.
Fear not free market mechanics.
If some measures need to be taken to stabilize iUSD volatility, I would suggest incentivizing holding it (eg. increasing iUSD stability pool returns) rather than penalizing those holding it already. Arbitrarily changing the rules of a game is one of the most efficient ways to destroy confidence in it. It’s not a good look.
My two cents is that this line of thinking sets a bad precedent.