Aave governance has advanced a risk proposal that would give Bitcoin-collateral borrowers significantly more leverage while reducing their margin for error. Submitted by risk service provider LlamaRisk, the proposal would let users on Aave V3 Ethereum Core borrow up to $0.81 against each $1 of WBTC or cbBTC collateral, up from $0.73, and raise the liquidation threshold from 78% to 85%.
The proposal was advanced to Snapshot on Sept. 21, with voting set to begin in less than 24 hours. It remains a governance proposal; final implementation would require an AIP after a positive Snapshot vote. As of reporting, the higher parameters are not live.
Under the proposed settings, a maximally leveraged Bitcoin position would reach the liquidation threshold after a roughly 4.7% collateral-price decline, compared with about 6.4% under current parameters. The raw distance between maximum loan-to-value and liquidation threshold falls from five percentage points to four. The change extends beyond Ethereum Core: Arbitrum WBTC’s ordinary LTV would rise by five percentage points, Base cbBTC’s by eight points, and WETH, wstETH and weETH would each receive a 0.5-point LTV increase. WETH would move to 81% LTV with an 84% liquidation threshold. On Base, cbBTC’s liquidation bonus would fall from 7.5% to 6%, and a stablecoin E-Mode would move to 82% LTV and an 85% liquidation threshold.
LlamaRisk’s analysis covered liquidation behavior from August 2025 through August 2026. On Ethereum Core, it counted 7,206 ETH liquidations that seized $618 million and 2,621 BTC liquidations that seized $358 million. For both collateral families, the value-weighted 99th-percentile time a liquidation call spent at or below its execution price was five minutes. During the February and October 2025 stress windows, 100% of seized volume cleared within five minutes of the price-feed publication that made liquidation profitable in every listed market.
The risk framework combines a one-hour price excursion with each reserve’s liquidation bonus to derive threshold ceilings. The 99.9th-percentile adverse one-hour move was 11.85% for ETH and about 5% for BTC, while the worst one-hour declines in the two-year sample were 24.27% for ETH and 10.72% for BTC. The proposal’s summary lists 11.15% for the worst BTC hour, an internal discrepancy LlamaRisk’s detailed table does not resolve. The gap highlights residual risk from price-feed stalls, slower liquidation activity, or deteriorating market depth during an extreme move.
The proposal does not include a complete current dataset of collateral-enabled balances, debt attributable to each affected asset, and account health factors. Until governance approves final parameters, existing market settings remain in force.
