Spark Protocol's January rsETH Delisting Proven Prudent Amid Market Crisis

monetsupply.eth, Spark Protocol’s protocol strategy lead, posted on X that in January, low-utilization assets such as rsETH were delisted, and collateral and functionality scope were continuously tightened—actions that sparked strong dissatisfaction among “ETH circular leverage” users. Additionally, Spark has long maintained high maximum interest rate caps on its ETH lending market, and over the past year, it ceded part of its business and revenue to Aave, whose ETH borrowing rates dropped to 10% or lower. However, in the current market crisis, this strategy has proven more prudent: SparkLend still maintains sufficient ETH withdrawal liquidity, while Aave has experienced liquidity shortages and even “freezes” across Ethereum mainnet and multiple chains such as Arbitrum and Base. monetsupply.eth further warned that since ETH is a core collateral asset, when market utilization reaches 100%, collateral liquidations cannot be executed properly. Liquidity depletion not only impairs depositors’ experience but may also pose systemic risk. Given Aave’s current liquidity constraints, a 15%-20% drop in ETH price could lead to significant bad debt accumulation (further compounded by potential fallout from the rsETH incident).