What is a Deposit Cap?
A deposit cap is a limit set on the maximum total value that can be deposited into a DeFi protocol, vault, or strategy. Caps protect against various risks and ensure strategy effectiveness as scale increases.
Why Protocols Set Deposit Caps
Strategy Capacity
- Strategies have optimal size limits
- Returns often decrease with scale
- Slippage increases with larger trades
Risk Management
- Limit exposure during testing
- Reduce potential loss in exploits
- Control collateral concentration
Protocol Limitations
- Oracle price impact concerns
- Liquidity constraints in underlying
- Smart contract gas limitations
Types of Caps
Global Caps
- Total TVL limit for entire protocol
- Used during launches or risky conditions
Vault/Pool Caps
- Individual strategy limits
- Most common type
User Caps
- Maximum per-address deposits
- Prevent whale dominance
Cap Progression
Typical Launch Sequence:- Initial launch: $1M cap
- Post-audit: $10M cap
- Battle-tested: $50M cap
- Mature: $100M+ or no cap
Finding Cap Information
- Protocol documentation
- Smart contract parameters
- DeFi dashboards (DefiLlama)
- Vault interface displays
Impact on Users
- May not be able to deposit during high demand
- Early access becomes valuable
- Caps may fill quickly after raises
Strategies for Capped Vaults
- Monitor for cap increases
- Set up notifications
- Act quickly when space opens
- Consider alternatives if consistently full
Capacity vs Caps
Some vaults don't have hard caps but display capacity utilization, warning when strategy approaches optimal size limits.