Aave reopens frozen markets but blocks new collateral loans
Aave has reopened frozen markets after implementing emergency borrowing cap cuts that preserve room to return to pre-Binance hot-wallet levels, though LlamaRisk estimates these measures remove roughly $3.8 billion of unused capacity.
In an Oct. 30 update, risk service provider LlamaRisk confirmed it had executed lower borrowing ceilings and temporary interest-rate changes on Aave V3 and V4. The GHO borrow-cap cuts on the Core and Prime markets remained queued. These measures follow an Oct. 29 emergency freeze after LlamaRisk's initial assessment described the exploiter's Aave position as overcollateralized and subject to normal liquidation.
Borrowing room remains limited
Aave V4's draw caps apply to individual credit lines through which lending markets, called spokes, draw assets from a shared hub. While a reserve remains frozen, those ceilings cannot enable new borrowing. LlamaRisk's cap methodology starts with the larger of borrowing before the exploit and borrowing at its observation time, then adds roughly 2%, with asset-specific rounded ceilings.
That approach can sharply reduce an old ceiling while keeping it above earlier debt. Debt repayments can leave more room beneath the same ceiling. Core USDC's listed cap was approximately 248.4 million USDC above debt as of Oct. 30 because borrowing had fallen below its pre-exploit level.
Core WETH listed ceiling of 1.79 million WETH was above then-current debt of 1,749,730 WETH. LlamaRisk said current debt was the sizing basis because it included the exploiter's 19,762 WETH loan. Separately, the queued GHO changes would cut Core's ceiling from 150 million to 105 million GHO and Prime's from 85 million to 35 million, a combined reduction of 95 million GHO.
Access depends on multiple factors
Aave access depends on restored borrowing caps, lower rates, collateral eligibility and available pool liquidity. During the freeze, new supply and borrowing were blocked while withdrawals, repayments, and liquidations remained enabled. Users also could not supply extra collateral to frozen reserves.
At 00:26 UTC on Oct. 30, LlamaRisk put Core USDC utilization at 97.8%, with several other reserves displayed at 100%. Reopening supply can allow cash to enter the relevant asset pool again, while repayments can return borrowed assets to it.
A higher rate cannot attract fresh deposits into a reserve that rejects supply, while lower interest growth can ease pressure on borrowers without repaying their principal or supplying the cash needed for withdrawals.
Collateral rules differ for positions
LlamaRisk's rollback plan describes four waves, with only the V4 collateral-configuration wave explicitly marked as already executed. For new borrowing, the plan keeps USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUt, PAXG and OP at zero collateral borrowing power.
On V3, the zero loan-to-value setting also applies in E-Mode, while the equivalent restriction is a zero collateral factor on V4. On V3, liquidation thresholds remain unchanged, so the LTV reduction itself does not change existing health factors. On V4, a new borrow, collateral withdrawal, or collateral toggle moves an existing position onto the zero-factor configuration.
Aave's V3 Pool documentation adds another withdrawal condition: zero-LTV reserves must be disabled as collateral or fully withdrawn before withdrawing other assets. Preserving earlier aggregate borrowing levels leaves room under the ceilings, though existing users still need relevant market permissions and collateral configuration.
Related
