Summary
LlamaRisk recommends the following parameter changes based on user behavior, on-chain liquidity, and position health observed in the latest review of Aave V3 reserves.
Aave V3 Mantle:
- Increase supply cap for FBTC from 30 to 50.
- Reduce supply cap for WETH from 80,000 to 33,900.
- Reduce borrow cap for WETH from 74,000 to 30,500.
- Reduce supply cap for WMNT from 1,900,000 to 1,226,000.
Aave V3 X Layer:
- Increase supply cap for xETH from 5,000 to 10,000.
- Increase supply cap for xBTC from 150 to 300.
Aave V3 Plasma:
- Reduce supply cap for WETH from 4,400 to 1.
- Reduce borrow cap for WETH from 4,000 to 1.
- Reduce supply cap for XAUt0 from 1,750 to 1.
FBTC (Aave V3 Mantle)
FBTC is currently at 98.4% supply cap utilization (29.5 / 30) on the Aave V3 Mantle instance.
Supply Distribution
Source: LlamaRisk, May 29, 2026
The top FBTC suppliers hold the asset predominantly without offsetting debt, with a minority carrying borrowing against the asset and the supply concentrated in a small number of wallets. The largely unleveraged base limits liquidation risk on the supply side as the cap expands.
Recommendation
FBTC supply has held near the 30 ceiling, sustaining 98.4% cap utilization. Given the spot-dominated supplier base and persistent demand at the cap, we recommend raising the supply cap from 30 to 50. The borrow side is held unchanged, as FBTC borrowing remains disabled.
xETH (Aave V3 X Layer)
xETH is currently at 73.5% supply cap utilization (3,674 / 5,000) on the Aave V3 X Layer instance.
Supply Distribution
Source: LlamaRisk, May 29, 2026
A single spot depositor holds roughly 75% of xETH supply with no offsetting debt, and the remaining suppliers are predominantly spot positions of similar size. Only a few addresses carry borrowing against xETH.
Recommendation
xETH supply sits at 73.5% of the current 5,000 cap. Beyond the predominantly spot supplier base, X Layer maintains a committed liquidation backstop that stands ready to provide liquidation capacity to the protocol over a multi-year term, which supports the additional exposure at the higher cap. We recommend doubling the supply cap from 5,000 to 10,000, holding the borrow side unchanged.
xBTC (Aave V3 X Layer)
xBTC is currently at 64.8% supply cap utilization (97 / 150) on the Aave V3 X Layer instance.
Supply Distribution
Source: LlamaRisk, May 29, 2026
The xBTC supplier base is leveraged, with every top position carrying debt at health factors ranging from approximately 1.19 at the lower end to above 2.0, and the smaller positions clustered near 1.2 to 1.4.
Recommendation
xBTC supply sits at 64.8% of the current 150 cap. The supplier base here is leveraged, but the same committed X Layer liquidation backstop provides standing capacity to clear these positions if needed, which underpins the higher cap. We recommend doubling the supply cap from 150 to 300, holding the borrow side unchanged.
WETH (Aave V3 Plasma)
WETH on Aave V3 Plasma is being deprecated. It currently sits at 30.0% supply cap utilization (1,318 / 4,400) and 16.9% borrow cap utilization (676 / 4,000).
Supply Distribution
Source: LlamaRisk, May 29, 2026
The WETH supplier base is predominantly leveraged, borrowing stablecoins against WETH collateral at health factors clustered between roughly 1.1 and 2.0, alongside a group of spot suppliers carrying no debt. On-chain routing now returns only about $394K of USDT0, which is in the process of being removed, increasing the risk that WETH positions cannot be cleared and the protocol could face bad debt under a sharp ETH drawdown, the graph below shows the liquidations under different ETH drawdowns.
Source: LlamaRisk, May 29, 2026
Recommendation
We recommend reducing the WETH supply and borrow caps to 1 to halt new exposure while existing positions repay. Handled separately through governance, the reserve is being wound down further by disabling WETH as collateral (max LTV to 0%) and raising the reserve factor, with a conditional second phase that would lower the liquidation threshold to clear any residual positions if the WETH is not withdrawn.
XAUt0 (Aave V3 Plasma)
XAUt0 on Aave V3 Plasma is similarly being deprecated. It currently sits at 59.7% supply cap utilization (1,044 / 1,750).
Supply Distribution
Source: LlamaRisk, May 29, 2026
The XAUt0 supplier base is almost entirely leveraged, borrowing USDT0 against XAUt0 collateral at health factors clustered between roughly 1.14 and 2.0, with exposure dominated by a single position. On-chain liquidity is minimal: a 20 XAUt0 sale (about $91K) returns only about $35K of USDT0, so there could be issues processing liquidations at any meaningful size, especially is XAUt0 where to drop more than 30%.
Source: LlamaRisk, May 29, 2026
Recommendation
We recommend reducing the XAUt0 supply cap to 1 to halt new exposure while existing positions repay. Additional measures handled through governance, including disabling XAUt0 as collateral, may follow as part of the wind-down.
Cap Reductions
WETH on Aave V3 Mantle sits at 49.9% supply cap utilization (39,883 / 80,000). WETH liquidity on Mantle has thinned since launch, and the Aave v3.7 upgrade removed the isolation-mode debt ceiling that currently bounds WETH-collateralized debt, so the supply cap is set to 33,900 (about 15% below current supply) and the borrow cap to 30,500 to halt growth. As a further precaution handled outside the Risk Steward process, a separate governance proposal lowers WETH’s max LTV to 0% to wind down its use as collateral, while existing positions are unaffected.
WMNT on Aave V3 Mantle sits at 76.0% supply cap utilization (1,443,393 / 1,900,000). As a volatile, chain-native collateral subject to the same isolation-mode removal under v3.7, its supply cap is set to 1,226,000 (about 15% below current supply) to prevent further growth, with a separate governance proposal lowering its max LTV to 0% as a further precaution outside the Risk Steward process. The borrow side is disabled and unchanged.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Aave V3 Mantle | FBTC | 30 | 50 | — | — |
| Aave V3 Mantle | WETH | 80,000 | 33,900 | 74,000 | 30,500 |
| Aave V3 Mantle | WMNT | 1,900,000 | 1,226,000 | — | — |
| Aave V3 X Layer | xETH | 5,000 | 10,000 | 2,600 | — |
| Aave V3 X Layer | xBTC | 150 | 300 | 20 | — |
| Aave V3 Plasma | WETH | 4,400 | 1 | 4,000 | 1 |
| Aave V3 Plasma | XAUt0 | 1,750 | 1 | — | — |
Next Steps
We will move forward and implement these updates via the Risk Steward process.
Disclosure
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.