LlamaRisk Seeks Aave V3 Cap Updates for wstETH and USDe Reserves

wstETH borrow cap nears exhaustion on Core

On Aave V3 Core, LlamaRisk said wstETH borrow demand has effectively reached the current limit. The reserve is using 99.8% of its borrow cap, with 13,977 wstETH borrowed against a cap of 14,000.

To address that, the firm recommended raising the borrow cap to 28,000. At that level, the new ceiling would be roughly twice the current outstanding borrow and would bring utilization down to about 49.9% after the change.

Borrower profile shows concentrated collateral mix

LlamaRisk said the largest wstETH borrowers currently show health factors ranging from 1.00 to 4.63, with a median of 1.11. Most of that borrower group sits below a health factor of 1.16.

Their collateral is concentrated mainly in weETH, which accounts for about $51 million or 80% by value, followed by WETH at roughly $8.5 million or 14%. Because those assets are closely correlated with wstETH, LlamaRisk said position stability depends more on how wstETH performs relative to the posted collateral than on broader market moves.

USDe supply on Plasma hits its cap

For Aave V3 Plasma, LlamaRisk recommended increasing the USDe supply cap from 550 million to 750 million. The current reserve is at 100.0% supply cap utilization, meaning existing room for additional deposits has been fully used.

The proposed 750 million cap would equal about 1.36 times current outstanding supply and would lower utilization to around 73.3% if adopted.

USDe borrow cap on Core set for reduction

LlamaRisk also proposed cutting the USDe borrow cap on Aave V3 Core from 700 million to 100 million. The firm said current usage does not justify the existing level, with only 77.9 million borrowed, or 11.1% of the present cap.

If reduced to 100 million, the cap would still stand at about 1.28 times outstanding borrows, putting post-change utilization near 77.9%. In the Plasma market, LlamaRisk noted that supply is concentrated: the largest position accounts for 64.6% of the reserve and the top five make up 94.8%. Among the top eight USDe suppliers, six also carry debt with health factors between 1.01 and 1.05, with a median of 1.02, while two are supplying on a spot basis.

According to the review, all six leveraged suppliers borrow USDT0 against USDe collateral, and three also hold sUSDe. Since USDe is priced at par with USDT, LlamaRisk described these positions as carrying very low liquidation risk.

Implementation will follow the Risk Steward process

The proposed updates are expected to move ahead through Aave’s Risk Steward process, according to the post. Once executed, the changes can be tracked through the LlamaRisk Risk Stewards Dashboard.

LlamaRisk said the review was prepared independently. The firm disclosed that it is a DeFi risk service provider funded in part by the Aave DAO, while stating it is not directly affiliated with the protocols covered in the assessment and did not receive compensation from those protocols or affiliated entities for this work.