Aave Freeze Snapshot Put Monad mUSD Borrowing APR at 36.1%

Aave’s precautionary freeze during the Binance hot-wallet incident coincided with a 36.1% variable borrowing APR in one mUSD reserve, while blocking new deposits and collateral top-ups.

Aave V3 Monad’s mUSD reserve had a 36.1% variable borrowing APR in the snapshot. At 8:26 p.m. ET Oct. 29 (00:26 UTC Oct. 30), the reserve had $31 million supplied and 95.5% utilization. That annualized rate was a snapshot for one reserve, not a record of any borrower’s interest over time or a rate for Aave’s markets as a whole.

During the freeze, new supply and borrowing were paused in affected reserves, while withdrawals, repayments and liquidations continued. Suppliers could withdraw when liquidity was available. Borrowers could not add collateral through new supply, leaving repayment as the only way to improve a health factor while the freeze was active.

Withdrawals pushed the largest stablecoin reserves to between 92% and 100% utilization. Under the settings then in force, variable borrowing APRs in those reserves ranged from 10% to 36%; some reached 55% at full utilization.

A proposed reduction in the mUSD reserve’s Slope2 parameter from 40% to 20% would have brought its modeled APR to 20.5% at 95.5% utilization. At full utilization, the proposed settings modeled an APR of 25%. At 9:49 a.m. ET Oct. 30 (13:49 UTC), LlamaRisk executed two batches of temporary rate changes and borrowing-cap reductions.

Aave reopened all V3 and V4 markets at 9:57 a.m. ET Oct. 30 (13:57 UTC). Nine assets remained at zero loan-to-value after reopening, preventing them from adding borrowing power for new loans.

On Oct. 31, LlamaRisk recommended restoring the earlier Slope2 settings. The Oct. 31 comparison projected a 10.35% APR for Aave V3 Base USDC under the proposed restored Slope2 setting, versus 7.69% under the temporary setting, at 95.6% utilization.