LlamaRisk's Risk Stewards submitted cap adjustment proposals to Aave V3 governance on May 6, recommending significant reductions across major reserves. Notable cuts include cbBTC supply cap from 25,000 to 16,500 BTC, WETH supply cap from 3.4 million to 2.7 million, USDC supply cap halved to 2.5 billion, and USDT supply cap cut from 6 billion to 2.6 billion. The USDe supply cap on MegaETH was doubled to 400 million, the sole increase.
For Armada's crypto-repo desk, Aave V3 parameters serve as a live DeFi benchmark for collateral risk. The cbBTC and WETH cap reductions suggest on-chain liquidity for BTC and ETH collateral is tightening relative to prior assumptions, which may warrant a downward revision to Armada's LTV ratios for BTC and ETH repo. The USDC and USDT cap cuts also signal stablecoin liquidity stress in DeFi markets that could affect crypto-repo counterparty behavior.