A governance post on the Aave forum synthesizes three recent discussions around wstETH collateral to identify four unresolved stress questions: whether the price oracle can reflect a severe crash, how much aggregate debt must be repaid simultaneously during liquidation, whether spot market depth is sufficient to absorb the largest single borrower position, and whether a liquidation bot winning an auction is actually proof of viable market clearing. The author concludes that financing for a large wstETH liquidation event remains unverified, meaning the protocol cannot currently confirm it would clear a stress scenario cleanly.
For Armada's crypto repo desk, this analysis is directly applicable to ETH and any liquid staking token collateral in the book. The four questions raised mirror the due diligence framework Armada should apply when setting LTV ratios and haircuts for ETH-denominated positions. Specifically, oracle gap risk during rapid price dislocations and the absence of verified large-lot liquidation capacity are critical inputs to Armada's collateral policy. Armada should stress-test its current ETH and SOL positions against these criteria and confirm that its Fireblocks custody and liquidation procedures can execute under the scenarios described.