LlamaRisk, acting as Aave V3 Risk Stewards, has recommended increasing the cbBTC supply cap on the Aave V3 Core instance from 19,000 to 22,800 BTC after utilization reached 99.6%. The top twenty cbBTC suppliers show health factors ranging from 1.04 to 4.22 with a median of 1.56, and all carry outstanding debt predominantly in USDC borrowed against cbBTC. The thin margin at the low end of health factors makes the pool sensitive to BTC price drawdowns.
Armada's crypto repo desk uses Aave on-chain data as a benchmark for BTC collateral LTV calibration and liquidation risk assessment. Near-total supply cap utilization with a significant portion of suppliers at health factors just above 1.0 indicates elevated liquidation cascade risk in a BTC sell-off. If the cap increase is approved, Armada should update its haircut models to reflect expanded but still concentrated exposure, and monitor whether the new cap fills rapidly, which would indicate persistent structural demand pressure on BTC collateral.