LlamaRisk Seeks Aave V3 Cap Cuts Across Eight Networks, With One WBTC Increase on Arbitrum

Arbitrum changes led by WBTC and ARB

On Arbitrum, the proposed WBTC change stands out because it moves in the opposite direction from the broader package. LlamaRisk said the reserve was using 89.2% of its current supply cap, and that raising the cap to 3,630 would bring post-change utilization to about 86.0%.

The review also provided more detail on WBTC supplier concentration and leverage. The top 20 suppliers account for 21.8% of supply, with the largest single holder at 4.5%. Seventeen of those top 20 addresses also carry debt, with health factors ranging from 1.15 to 8.22 and a median of 1.96. Among that group, 15 borrow USDC and seven borrow USDt against WBTC collateral, with some borrowing both, meaning their health factors track BTC price moves.

Alongside the WBTC increase, LlamaRisk proposed cutting ARB’s supply cap on Arbitrum to 30.8 million from 52 million. ARB was at 37.6% utilization, equal to 19.53 million supplied, after a 6.8% decline in supply over the past 30 days. The lower cap would leave the reserve at roughly 63.4% utilization.

Avalanche, Prime and Mantle face sizeable reductions

Avalanche accounts for four of the proposed changes. LlamaRisk recommended lowering the USDC supply cap to 90 million from 150 million, after utilization stood at 45.0% with 67.48 million supplied and supply fell 5.8% over 30 days. USDt’s supply cap would be reduced to 50 million from 100 million; that reserve was at 24.9% utilization, with 24.88 million supplied and supply down 12.4% over the same period.

The BTC.b supply cap on Avalanche is also set to fall, from 1,700 to 1,500. The reserve was at 68.2% utilization, or 1,160 supplied, with supply described as broadly unchanged over the prior month. For WETH.e, LlamaRisk proposed a borrow cap cut to 4,500 from 7,000 after borrow utilization fell to 18.4%, with 1,291 borrowed and total borrows down 70.5% over 30 days.

Outside Avalanche, Aave V3 Prime’s WETH supply cap would be cut to 25,000 from 60,000, reflecting 31.3% utilization and a modest 0.8% drop in supply over 30 days. On Mantle, LlamaRisk proposed reducing USDe’s supply cap to 50 million from 80 million after supply dropped 36.5%, and lowering sUSDe’s cap to 80 million from 100 million after a 13.7% decline in supply.

Core, MegaETH, Base and Polygon also included

On Aave V3 Core, LlamaRisk proposed reducing USDS supply and borrow caps at the same time. The supply cap would fall to 10 million from 25 million, while the borrow cap would be lowered to 9 million from 20 million. The reserve was at 20.1% supply utilization and just 1.3% borrow utilization, with supply down 40.3% and borrows down 23.7% over the past month.

For MegaETH, the recommendation is to trim the stcUSD supply cap to 10 million from 15 million. That reserve was at 24.5% utilization, with 3.67 million supplied, after a 45.0% decline in supply over 30 days.

Two more borrow cap reductions round out the package. On Base, cbBTC’s borrow cap would be cut to 150 from 380 after borrows fell 9.2% over 30 days and utilization stood at 22.7%, or 86 borrowed. On Polygon, WETH’s borrow cap would be lowered to 6,000 from 11,000. Even though borrows there rose 9.9% over the past month, utilization was still 38.5%, equal to 4,239 borrowed.

Implementation route and what comes next

LlamaRisk said the recommendations are based on the latest review of Aave V3 reserves, taking into account user behavior, on-chain liquidity and position health. For each reserve, the proposed cap changes would leave utilization materially higher than current levels while still below full capacity.

The next confirmed step is execution through Aave’s Risk Steward process. According to the proposal, the team intends to move forward with implementation, and completed changes will be visible on the LlamaRisk Risk Stewards Dashboard.