LlamaRisk Moves to Pull $1.33B of Collateral Out of Aave V3 Core

LlamaRisk, which handles risk for Aave, has floated a wind-down of about $1.33 billion in Aave V3 Core collateral, with the debt backed by those assets at $1.03 billion as of Nov. 9. It is still a discussion-stage proposal, not an approved market change. The first measures would need approval, followed by an onchain governance vote.

rsETH, osETH, LBTC, tBTC and rETH make up most of the collateral in scope. Smaller reserves on the list are eBTC, BTC.b, tETH, PT-srUSDe-22OCT2026 and LDO, plus mUSD, which can be borrowed but is not used as collateral. LlamaRisk's argument: Core's pooled borrowing rates leave suppliers holding complex collateral without pay for the extra risk, including restaking, leveraged wrappers, derivatives-backed strategies and custom bridges, plus issuers it deems under-resourced and reserves with thin demand.

The opening step would freeze the affected reserves and set their loan-to-value limits to zero, including in efficiency modes that let borrowers post more against correlated assets. That halts new supply and new borrowing against the collateral without triggering immediate liquidations, so holders can still repay, withdraw or migrate. rsETH and tBTC are already frozen, according to LlamaRisk. The plan would add wstETH, weETH and cbETH to rsETH's efficiency-mode category so borrowers can swap collateral without first clearing their WETH debt.

Suppliers of CRV, tBTC, rETH, crvUSD, FBTC, UNI and mUSD would see less interest income: their reserve factors, the cut of borrower interest routed to the DAO, would climb to 99% with no initial bump in borrow rates. If migration stalls, LlamaRisk could gradually lower liquidation thresholds for LBTC, tBTC and rETH. For rsETH and osETH borrowing loops it pegs at 12 to 14 times leverage, higher WETH borrowing rates are a last resort, paired with rebates for borrowers holding neither asset. LlamaRisk warns that cutting liquidation thresholds by two to five percentage points could put most of that loop collateral up for liquidation at once.

Aave V4 is the intended landing spot: LlamaRisk expects LBTC to keep running through a dedicated borrowing module, or spoke, on V4's Ethereum Core Hub. Collateral staying in place includes WETH, wstETH, weETH, cbETH, WBTC, cbBTC, USDe, sUSDe and syrupUSDT. After approval, LlamaRisk plans to file the initial changes as an onchain proposal and report on the unwinding monthly, with any follow-up steps announced on the forum first.