Some Aave loans backed by yield-bearing collateral had narrow liquidation buffers in LlamaRisk's Oct. 9 snapshots. Cashing out that collateral takes a market sale or, on Arc, a withdrawal queue that can take hours. LlamaRisk's recommendations would raise the market caps.
Every top PT-AUSD supplier on Monad carried debt, and two syrupUSDC positions accounted for about 97% of supplied syrupUSDC on Arc, according to LlamaRisk's Oct. 9 snapshots of Aave. The collateral in both markets can take a market sale, or for Arc holders choosing Ethereum redemption, a withdrawal queue that can take hours, to turn into cash.
Aave's health factor compares collateral value, adjusted for liquidation thresholds, with debt, and a position becomes eligible for liquidation below 1. The top Monad PT suppliers had health factors between 1.01 and 1.18, with a median of 1.03. USDC was their dominant debt asset, followed by USDT0.
Monad's PT-AUSD loans need a sale before maturity
The Monad collateral is PT-AUSD-17DEC2026, a Pendle principal token that represents a claim on AUSD at its Dec. 17 maturity. Before maturity, a liquidator has to sell the token on the market. Pendle's documented route sells PT into SY and then redeems SY into a supported output token.
LlamaRisk reported that the reserve's 30 million PT supply cap was fully utilized on Oct. 9 and recommended raising it to 60 million PT. The review describes the Pendle pool as 47% PT and 53% SY.
Arc's syrupUSDC loans rely on buyers or a redemption queue
On Arc, the two largest syrupUSDC positions had health factors of 1.02 and 1.01. All outstanding debt among syrupUSDC suppliers was USDC. A liquidator supplies the borrowed stablecoin, receives collateral and then has to recover cash from it.
LlamaRisk's September assessment found one local Uniswap V4 venue where proceeds saturated near $500,000 as its USDC side ran out. Selling elsewhere means bridging to Ethereum and requesting redemption through Maple's queue. Maple's terms say most withdrawals take under 24 hours, but they can take up to 30 days.
Proposed caps raise the stakes for exits
LlamaRisk's Oct. 9 Arc proposal would raise the Maple Spoke's USDC draw cap from 23 million to 46 million USDC. The draw cap was fully utilized in that review, and the syrupUSDC add cap was 87.8% utilized.
Larger caps would let more collateral into Aave, but a successful exit still depends on buyers or redemption. The liquidator also has to fund any redemption wait with enough USDC to repay the Aave loan first.
Source: CryptoSlate
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