Aave Freezes ETH Loans Ahead Of Merger
- Lending Platform Aave Has Temporarily Stopped Ether Borrowing
- This is due to the threat to liquidity pools amid hype and speculation
- The decision was made by the community
The largest DeFi lending protocol, Aave, has suspended Ethereum lending. This decision was made by the community by vote.
They were guided by the fact that increased demand for ETH threatens the liquidity of the protocol. After all, the borrowed Ether can be used to capitalize on potential forks after the ” transition “. This is evidenced by numerous tweets from the crypto community:
Another risk comes from the higher borrowing rate of ETH. This can cause recursive stETH/ETH positions to become unprofitable. Clients will begin to massively close positions, which will increase the deviation of the stETH rate. At the moment, stETH is trading at a 15% discount to ” regular ” ether.
We have detailed material on how the Aave protocol works and what opportunities it offers for earning.
Now Aave is wary of a sharp rise in the utilization rate. In this case, most of the ETH will go to loans, and the liquidators will have a decrease in collateral to service regular liquidations of positions in ETH.