Summary
We support the underlying motivation to facilitate a smooth rollover for users from the September expiry and retain capital within the Aave ecosystem. However, our analysis indicates that the timing of this implementation presents a significant, albeit temporary, risk of a liquidity crunch that would negatively impact all stablecoin borrowers. We therefore recommend enacting this AIP around the September PT maturity on September 25, 2025.
Analysis of Current Market Conditions
As noted in the analysis by @ChaosLabs, the available stablecoin liquidity on Aave before reaching Uoptimal is currently constrained. A rapid influx of demand to fill the newly proposed cap space (~$1.6B between the two assets) would push utilization for all major stablecoins beyond the Uoptimal utilization.
To quantify the potential impact, we modeled a scenario where $1.6B of new stablecoin demand is introduced into the market before the September PTs mature. Around $3.5B of liquidity is freed up.
Our equilibrium model calculates the borrow APR at which this new demand would be distributed across USDT, USDC, and USDe. The results show a sharp, system-wide increase in borrowing costs:
Equilibrium Analysis Results
New Demand: $1.60B
Equilibrium APR: 15.586%
Asset New Demand ($M) Utilization (%) Borrow Rate (%) USDT 791.39 86.54% → 97.19% 6.11% → 15.59% USDC 699.38 83.92% → 95.63% 5.93% → 15.59% USDe 109.23 84.62% → 91.62% 7.05% → 15.59%
An equilibrium borrow rate of ~15.6% represents a significant short-term shock to the market. This rate would affect all borrowers, not just those looping PTs, potentially forcing deleveraging across the protocol.
The following charts illustrate the sensitivity of each stablecoin’s borrow rate to new demand under current liquidity conditions. The Equilibrium Point marks the demand level and rate calculated in our model. We have also added a more conservative estimate of the demand, showing the profitability frontier for the new November PTs, currently at 9%.
Source: LlamaRisk, 16 September 2025
Source: LlamaRisk, 16 September 2025
Source: LlamaRisk, 16 September 2025
USDe Slope2 Changes
Lowering the Slope2 from 50% to 30% is a prudent change. By flattening the Slope2, we help mitigate the risk of extreme rate volatility, protecting Aave users.
Source: LlamaRisk, 16 September 2025
Proposed Actions
The September PT maturity is only 8 days away, so a brief waiting period is the most prudent course of action. The deleverage of the September maturity is expected to free up substantial stablecoin liquidity, allowing the November PT caps to be increased and filled without causing the severe rate volatility highlighted in our analysis.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk serves the Horizon protocol and has been engaged to conduct due diligence, parametrisation, and ongoing risk services.
The information provided should not be construed as legal, financial, tax, or professional advice.