Aave's Risk Stewards, guided by LlamaRisk analysis, have approved supply and borrow cap reductions across multiple Aave V3 deployments, including cuts to sUSDe and USDe caps on Plasma and Mantle, BTC.b and WETH.e caps on Avalanche, and significant WETH cap reductions on Arbitrum from 240,000 to 150,000 supply and 215,000 to 135,000 borrow. The changes reflect observed user behavior, declining on-chain liquidity depth, and position health concerns in the latest risk review cycle.
For Armada's crypto-repo desk, Aave V3 cap reductions on BTC and ETH derivatives are a leading indicator of stressed on-chain liquidity conditions that should inform haircut and LTV calibration. If Armada uses Aave benchmarks to set LTV floors for BTC or ETH collateral, the cap cuts on BTC.b and WETH warrant an immediate review of whether current haircuts remain adequate. Any counterparty posting sUSDe as collateral also warrants heightened scrutiny given the dual cap reductions on that asset.