LlamaRisk has proposed increasing the USDC borrow cap on Aave V3 Core from 2.75 billion to 2.95 billion after usage of the current limit climbed to 99%. The recommendation was published as part of the firm’s latest reserve review, which it said was based on user behavior, on-chain liquidity and position health.

At the time of the proposal, 2.72 billion USDC had been borrowed against the existing 2.75 billion cap. LlamaRisk said the adjustment would reduce post-change borrow cap utilization to about 92.3%, while leaving any further borrowing constrained by the amount of liquidity actually available in the reserve.

Cap pressure on the USDC reserve

The proposal focuses on the USDC market in Aave V3 Core, where borrow cap utilization had reached 99.0%. In practical terms, that meant the reserve was close to the maximum amount of USDC that could be borrowed under the current setting.

LlamaRisk also reported reserve utilization of 95.6%, which is above the 94% optimal point referenced in its assessment. That indicates the market was already operating beyond the level the framework identifies as optimal, adding to the case for a parameter change.

How borrower risk is distributed

In its review of the largest borrowers, LlamaRisk said the top 20 USDC debt positions had health factors ranging from 1.02 to 3.03, with a median of 1.75. The largest single borrower represented roughly 14% of total outstanding debt.

According to the review, the collateral backing those positions is concentrated mainly in ETH- and BTC-linked assets. Among the top 20 borrowers, six posted weETH, five cbBTC, five WETH, four wstETH and three WBTC. Two positions also used USDe and two used sUSDe as collateral.

LlamaRisk said this mix means the health of the cohort is tied largely to ETH and BTC price movements, while positions backed by USDe and sUSDe also depend on the exchange rate of those assets relative to the stablecoin debt.

Why the higher cap would still be limited

The recommended change would lift the borrow cap by 200 million USDC, from 2.75 billion to 2.95 billion. Even so, LlamaRisk noted that the new cap would sit above the current USDC supply on Aave V3 Core, which stood at 2.85 billion at the time of the post.

Because of that, the proposal does not imply that the full additional headroom could be used immediately. LlamaRisk said extra borrowing would remain bounded by available liquidity, which it estimated at about 126 million USDC.

Implementation path

LlamaRisk said the update will be carried out through the Risk Steward process. The firm also said implemented changes can be tracked through the LlamaRisk Risk Stewards Dashboard.

For now, the confirmed step is the parameter update process itself: the proposal calls only for a borrow cap increase on Aave V3 Core USDC, with no other reserve changes listed in the published review.

Source: governance.aave.com