Aave has raised borrowing limits for Bitcoin- and Ether-linked collateral across V3 and V4, lifting the maximum loan-to-value ratio for WBTC and cbBTC on V3 Ethereum Core to 81% from 73%.
The changes came through governance proposal 536, authored by LlamaRisk and implemented by Aave Labs. Aave’s governance record lists all three payloads as executed. The Ethereum transaction implemented its V3 and V4 changes on Oct. 28 at 5:35 a.m. ET.
The higher Core limits let WBTC and cbBTC borrowers take on about 11% more debt against the same collateral valuation, according to The Defiant’s calculation. Loan-to-value, or LTV, limits new borrowing; the liquidation threshold, or LT, determines when a position becomes eligible for liquidation. More capacity does not itself create a loan: borrowers must choose to draw it.
V3 changes cover Ethereum Core, Arbitrum and Base. The comparison below shows the previous and implemented LTV/LT pairs; Base’s cbBTC stablecoin efficiency mode applies to borrowing GHO and USDC.
Base’s standard cbBTC liquidation bonus—the extra collateral paid to liquidators—also falls to 6% from 7.5%.
In V4’s separately configured borrowing markets, known as spokes, the Ethereum Main Spoke’s collateral factors rise from 83% to 84% for WETH, 80% to 82% for wstETH, 80% to 81% for weETH, and 78% to 85% for WBTC and cbBTC. The AIP says positions using configuration key 0 receive the increased factor without refreshing their settings. It also updates key 2 for wstETH and weETH, while their key 1 remains at 0%.
More Debt, Less Room at the Bitcoin Limit
Higher liquidation thresholds improve existing V3 positions’ health factors if debt and collateral stay unchanged. Under Aave’s liquidation mechanics, that metric compares collateral value, weighted by liquidation thresholds, with debt; a reading below 1 permits liquidation.
The trade-off appears when Bitcoin-backed borrowers use the new maximum. On Core, the gap between WBTC and cbBTC’s LTV and LT shrinks from five percentage points to four. For a position backed only by either token and drawn to the limit, a collateral-price decline of about 4.7% would reach the liquidation boundary, versus 6.4% under the previous settings, The Defiant calculates. That assumes a fixed debt value and excludes accrued interest.
The cushion does not narrow across the board: Core WETH’s gap widens from 2.5 percentage points to three, as do those for wstETH and weETH.
In its risk assessment, LlamaRisk calibrated thresholds to the 99.9th percentile of one-hour adverse price moves, accounting for liquidation bonuses and observed processing speed. Its stated residual risk is a move beyond that percentile coinciding with stalled price updates and liquidations.