FYI I'm gonna say "reserve factor" as a proxy for "both ask and bid factors" since imo they should be equal, even though they're technically two system variables. This factor is a % of treasury value dedicated to wall capacities and is currently set to 0.1 (or 10%).
I would propose to also shave down the choices to make here, and instead request a 50% reduction to 0.05 reserve factor, 80% reduction to 0.02 reserve factor (your initial proposal from the RFC), or 0% reduction to leave reserve factor at 0.1.
I really don't agree with the rush from a security standpoint; as far as I can see, a malicious actor has no path to a successful attack using the upper wall. Current price action has no bearing on this attack's probability of occurrence or success.
That being said, I believe there's a mismatch between total system liquidity, and RBS capacity. We have quite low liquidity and quite high RBS capacity. Effectively this causes us to bounce around the range without breaking through, leading to unpredictable emissions at a high scale. I'm most favorable to a 50% reserve factor reduction to balance this discrepancy out. I think 80% goes too far and would need immediate readjusting, in the case we'd go to a decent premium.
I did some simulating based on @rusowsky's code and have some illustrative charts below. I only use this sim to informatively compare bullish and bearish scenarios. The system is too complex in practice to have a precise picture of reality, so take them with that grain of salt. I would expect price to be more directional than the random price walk used in the sim; I'd expect more breakouts of cushions and walls than what's portrayed in the graphs below.
Bullish scenarios:
![Scenario 1](https://imgur.com/a/RJeWOsG)
https://imgur.com/a/RJeWOsG
![Scenario 2](https://imgur.com/a/hTPd8SY)
https://imgur.com/a/hTPd8SY
![Scenario 3](https://imgur.com/8TgAYZw)
https://imgur.com/a/zsFgpqj
Clearly we spend way too much time between cushions with 0.1 reserve ratio. It's indeed too conservative. With a 0.02 ratio I worry about too intense of pullbacks being allowed as there's otherwise very little system liquidity to support a premium. I like 0.05 as a happy medium. It still allows breakouts but is stronger defending pullbacks in the bullish scenario.
Bearish scenarios:
![Scenario 4](https://imgur.com/a/J8xF7UI)
https://imgur.com/a/J8xF7UI
![Scenario 5](https://imgur.com/a/73VcZgr)
https://imgur.com/a/73VcZgr
![Scenario 6](https://imgur.com/a/tZsj9yN)
https://imgur.com/a/tZsj9yN
The bearish scenario essentially keeps us around backing, regardless of RBS setup. With a 0.1 reserve ratio we just bounce between cushions forever with little gain. A 0.02 reserve ratio gives substantial room for activity, where 0.05 allows less movement.
Personal conclusion
I believe either 0.05 (50% reduction) or 0.02 (80% reduction) would be okay. I personally like 0.05 better because it is sufficiently lenient in bullish scenarios, but maintains decent liquidity at premium vs 0.02. In my opinion 0.02 skews the liquidity balance too far in the other direction but still believe it's a better setup than current.