Summary
LlamaRisk recommends the following supply cap change to accommodate anticipated USDe demand on the Aave V3 MegaETH instance:
- Increase supply cap for USDm on Aave V3 MegaETH from 200,000,000 to 400,000,000.
The borrow cap remains unchanged at 190,000,000.
USDm (Aave V3 MegaETH)
USDm is currently at 6.8% supply cap utilization (13,687,005 / 200,000,000) and 0.1% borrow cap utilization (98,729 / 190,000,000) on the Aave V3 MegaETH instance. The reserve is configured with an LTV 0% and cannot be used as collateral. Borrowing is enabled.
Market Context
USDm is a USD-pegged stablecoin, and the reserve remains in an early adoption phase on MegaETH. The proposed supply cap increase is preemptive, intended to accommodate anticipated demand once USDe is listed on the same instance. The expected usage pattern is a leveraged stablecoin loop where depositors supply USDe as collateral and borrow USDm to recycle yield. In that configuration, USDm supply must absorb the full notional of the looped position on the deposit leg, and the supply-side headroom is the binding constraint on aggregate loop size.
Risk Profile
USDm tracks the US dollar and has historically traded within a narrow band around its peg. As a non-collateral asset (LTV 0%), it does not contribute to liquidation risk on the supply side, and depositors carry no collateral exposure to the asset. On the borrowing side, a USDe/USDm loop pairs two USD-pegged stablecoins, with collateral and debt values highly correlated.
Recommendation
Given the planned USDe listing on Aave V3 MegaETH, the structurally low liquidation risk of a correlated stablecoin loop, and the absence of supply-side liquidation pathways for a non-collateral asset, we recommend doubling the supply cap to 400,000,000. The borrow cap is held at 190,000,000 because borrow utilization remains below 0.1%, and we see no basis to expand it on this iteration; a borrow cap revision can be revisited once loop activity materializes.
Specification
| Instance | Asset | Current Supply Cap | Recommended Supply Cap | Current Borrow Cap | Recommended Borrow Cap |
|---|---|---|---|---|---|
| Aave V3 MegaETH | USDm | 200,000,000 | 400,000,000 | 190,000,000 | 190,000,000 |
Next Steps
We will proceed with implementing this update 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.