Risk Stewards: Supply and Borrow Cap Reductions on Aave V3 / 2026.08.10

[LlamaRisk]

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 Plasma:

• Reduce supply cap for sUSDe from 450,000,000 to 225,000,000.
• Reduce supply cap for USDe from 475,000,000 to 375,000,000.
• Reduce borrow cap for USDe from 425,000,000 to 335,000,000.

Aave V3 Mantle:

• Reduce supply cap for sUSDe from 125,000,000 to 75,000,000.

Aave V3 Avalanche:

• Reduce supply cap for BTC.b from 2,200 to 1,700.
• Reduce supply cap for WETH.e from 20,000 to 15,000.
• Reduce borrow cap for WETH.e from 18,000 to 13,500.

Aave V3 Arbitrum:

• Reduce supply cap for WETH from 240,000 to 150,000.
• Reduce borrow cap for WETH from 215,000 to 135,000.
• Reduce supply cap for weETH from 59,000 to 45,000.

Cap Reductions

The reserves below carry supply headroom above current demand. Each proposed cap retains room for growth over the current outstanding balance.

Plasma

Source: LlamaRisk, August 10, 2026

sUSDe on Aave V3 Plasma sits at 34.8% supply cap utilization (156,539,124 / 450,000,000). The proposed cap of 225,000,000 is approximately 1.44x current outstanding supply, landing at approximately 69.6% post-change cap utilization.

USDe on Aave V3 Plasma sits at 57.3% supply cap utilization (272,338,483 / 475,000,000) and 47.3% borrow cap utilization (201,231,344 / 425,000,000). The proposed supply cap of 375,000,000 is approximately 1.38x current outstanding supply and the proposed borrow cap of 335,000,000 is approximately 1.66x current outstanding borrow, landing at approximately 72.6% and 60.1% post-change cap utilization respectively.

Mantle

Source: LlamaRisk, August 10, 2026

sUSDe on Aave V3 Mantle sits at 34.8% supply cap utilization (43,559,608 / 125,000,000). The proposed cap of 75,000,000 is approximately 1.72x current outstanding supply, landing at approximately 58.1% post-change cap utilization.

Avalanche

Source: LlamaRisk, August 10, 2026

BTC.b on Aave V3 Avalanche sits at 58.1% supply cap utilization (1,278 / 2,200). The proposed cap of 1,700 is approximately 1.33x current outstanding supply, landing at approximately 75.2% post-change cap utilization.

WETH.e on Aave V3 Avalanche sits at 56.4% supply cap utilization (11,282 / 20,000) and 47.3% borrow cap utilization (8,521 / 18,000). The proposed supply cap of 15,000 is approximately 1.33x current outstanding supply and the proposed borrow cap of 13,500 is approximately 1.58x current outstanding borrow, landing at approximately 75.2% and 63.1% post-change cap utilization respectively.

Arbitrum

Source: LlamaRisk, August 10, 2026

WETH on Aave V3 Arbitrum sits at 43.9% supply cap utilization (105,360 / 240,000) and 26.1% borrow cap utilization (56,130 / 215,000). The proposed supply cap of 150,000 is approximately 1.42x current outstanding supply and the proposed borrow cap of 135,000 is approximately 2.41x current outstanding borrow, landing at approximately 70.2% and 41.6% post-change cap utilization respectively.

weETH on Aave V3 Arbitrum sits at 63.2% supply cap utilization (37,287 / 59,000). The proposed cap of 45,000 is approximately 1.21x current outstanding supply, landing at approximately 82.9% post-change cap utilization.

Specification

Instance	Asset	Current Supply Cap	Recommended Supply Cap	Current Borrow Cap	Recommended Borrow Cap
Aave V3 Plasma	sUSDe	450,000,000	225,000,000	-	-
Aave V3 Plasma	USDe	475,000,000	375,000,000	425,000,000	335,000,000
Aave V3 Mantle	sUSDe	125,000,000	75,000,000	-	-
Aave V3 Avalanche	BTC.b	2,200	1,700	79	-
Aave V3 Avalanche	WETH.e	20,000	15,000	18,000	13,500
Aave V3 Arbitrum	WETH	240,000	150,000	215,000	135,000
Aave V3 Arbitrum	weETH	59,000	45,000	-	-

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.

[Gray]

What is the rationale to decrease the caps? I understand there is a downtrend on market utilization, but why decrease the caps?

[LuFFy]

I think becasue of low supply utilization

[LuFFy]

Supporting the recent parameter adjustments by LlamaRisk to expand the Plasma USDe supply cap to $750M while suppressing the Core borrow cap to $100M. Isolating recursive looping demand to a high-throughput network while protecting Core’s shared liquidity from contagion is the correct structural move.

However, recent on-chain liquidity depth analysis indicates a severe bottleneck in secondary market exit capacity that warrants close monitoring as the Plasma caps fill.

Quantitative Findings (Multi-DEX Aggregator Depth):

• The Liquidity Cliff: Aggregated routing across Ethereum mainnet (Curve, Uniswap v3 0.01%, Balancer) hits a hard liquidity cliff at roughly $4.7M in sell volume. Pushing beyond this threshold immediately breaks the 5% price impact boundary, spiking slippage into double digits (10% - 16%).
• The Exposure: A conservative estimate of highly leveraged, recursive USDe collateral (Health Factor < 1.05) sits at $80M.
• Under an immediate 5% USDe depeg scenario, the protocol faces an uncovered bad-debt gap of ~$76M. Secondary markets simply cannot absorb the liquidatable volume without crashing the execution price well below the standard liquidation bonus.

Recommendation:
As Ethena’s basis-trade yield continues to attract leverage on Plasma, risk stewards should adopt the ratio of “Looped TVL” to “Aggregated DEX Depth at 5% Impact” as the primary binding constraint for future supply cap increases, rather than aggregate TVL or historical volatility alone.