Aave's Risk Stewards, guided by LlamaRisk, have approved a set of supply cap changes across Aave V3 markets effective May 18, 2026. Notable reductions include cbBTC from 22,000 to 19,000, weETH from 1,110,000 to 1,075,000, wstETH from 850,000 to 810,000 on Core, and a sharp cut to FBTC from 520 to 175. PT-USDG and cbETH on Base saw increases. The changes reflect deteriorating on-chain liquidity and position health in certain reserves.
For Armada's crypto repo desk, supply cap reductions on wrapped BTC and liquid staking tokens indicate that on-chain exit liquidity for these assets is tightening. Armada uses Aave benchmarks to calibrate LTV ratios for collateral like BTC and ETH derivatives. Tighter caps suggest higher liquidation risk in stress scenarios, warranting a conservative review of haircuts applied to cbBTC, weETH, and wstETH collateral positions.