# Oracles

For markets where the borrowable asset is USDC, we configure the USDC price at 1 USD within the quote function of the oracle, ensuring it remains constant regardless of market fluctuations. This mechanism is particularly useful in the following stablecoin depeg scenarios:

* Upward depeg: If USDC trades above $1, fixing the oracle price at $1 prevents borrowers from being prematurely liquidated due to a temporary price spike.
* Downward depeg: If USDC trades below $1, fixing the price prevents users from borrowing excess USDC at a discount, which would otherwise increase systemic risk.

With a market-rate oracle, users who borrow a depegged USDC below $1 may later face liquidations once the token regains its peg, as the nominal value of their debt increases. This can also introduce potential insolvency risk if the rebound is sharp and liquidity is thin.

During depeg events, our automated risk-off system proactively deallocates from USDC-based markets to minimize exposure and halts further borrowing until the asset stabilizes around parity.


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