Aave Reopens Frozen Markets But Keeps New Collateral Loans Disabled

LlamaRisk Executes Emergency Borrowing Cap Reductions

Aave reopened frozen lending markets Wednesday after risk service provider LlamaRisk deployed lower borrowing ceilings and temporary interest-rate adjustments across V3 and V4 deployments. According to updates published Oct. 30 by LlamaRisk, the emergency actions remove roughly $3.80B of unused capacity from the protocol. GHO borrow-cap cuts on Core and Prime markets remain queued, with planned reductions dropping Core from 150M to 105M GHO. Prime markets face a parallel drop from 85M to 35M GHO, marking a combined reduction of 95M GHO.

The protocol imposed an emergency freeze Oct. 29 after initial assessments confirmed the exploiter held an overcollateralized position subject to liquidation. LlamaRisk methodology establishes new caps by taking the larger value between pre-exploit borrowing and borrowing at observation time, adding roughly 2% with asset-specific rounding. Core USDC listed caps sat approximately 248M USDC above debt as borrowing declined below pre-incident levels.

New Collateral Loans Blocked Across Multiple Assets

Protocol rules continue blocking new collateral loans for specific tokens despite the partial market reopening. According to LlamaRisk deployment notes, USDT, USDC, USDT0, POL, WAVAX, sAVAX, XAUt, PAXG, and OP maintain zero collateral borrowing power. On V3, this zero loan-to-value setting applies directly inside E-Mode. V4 enforces the restriction through an equivalent zero collateral factor configuration.

Aave V3 pool documentation requires zero-LTV reserves to be disabled as collateral or fully withdrawn before users can extract other assets. Suppliers must maintain sufficient unborrowed tokens for exits while keeping position health intact. Core USDC utilization reached 97.8% on Oct. 30, with multiple other reserves displaying 100% utilization according to LlamaRisk monitoring.

Temporary Interest Rate Curves Adjusted For Borrowers

LlamaRisk executed temporary Slope2 reductions to lower the steep portion of Aave borrowing-rate curves above optimal utilization points. Modeled rates at or below the optimal point remain unchanged because base rates and first slope parameters stay fixed. Higher rates cannot attract fresh deposits into reserves rejecting new supply, but lower interest growth eases pressure on existing borrowers.

The rollback plan outlines four distinct waves, with the V4 collateral-configuration wave marked as executed in 13:49 UTC updates. Plasma GHO proposed second slope settings conflicted between summary documents and technical specifications, leaving borrowers without a confirmed universal ceiling. Liquidity constraints and account permissions dictate exact access as markets resume operations.