Aave governance has advanced a proposal that would let Bitcoin-backed borrowers on Aave V3 Ethereum Core take on more debt against WBTC and cbBTC, while narrowing the price buffer before liquidation. A Snapshot vote was set to open within 24 hours of the Sept. 21 announcement, with an implementation AIP to follow only if it passes.
Borrowing limit rises, cushion shrinks
A proposal from risk service provider LlamaRisk would raise the maximum loan-to-value for WBTC and cbBTC on Ethereum Core from 73% to 81%, letting borrowers draw up to $0.81 against each $1 of collateral instead of $0.73. The liquidation threshold would move alongside it, from 78% to 85%.
Because both figures shift together, the simplified price cushion before liquidation would narrow from about 6.4% to 4.7% for a maximally borrowed position. Existing borrowers would not automatically add debt, but new or adjusted positions could carry more leverage with less room before a margin call.
The changes reach beyond Ethereum Core. Arbitrum WBTC's ordinary LTV would rise five percentage points and Base cbBTC's by eight, while Base cbBTC's liquidation bonus would fall from 7.5% to 6%. Ethereum Core WETH, wstETH and weETH would each get a 0.5-point LTV increase.
A year of fast liquidations backs the case
LlamaRisk's argument rests on liquidation data from August 2025 through August 2026 across Ethereum Core, Arbitrum and Base. On Ethereum Core, the study counted 7,206 ETH liquidations that seized $618 million and 2,621 BTC liquidations that seized $358 million, with a value-weighted 99th-percentile work-off time of five minutes for both.
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. February produced no bad debt; October produced $0.39 million of bad debt against roughly $128 million in seized volume, though LlamaRisk said none of it touched the ETH or BTC collateral reviewed for this proposal.
That history cannot rule out losses in a future disrupted market. The same two-year sample held a worst one-hour BTC decline of 10.72%, more than twice the roughly 5% figure LlamaRisk used to set the proposed threshold, leaving the model's ceiling to absorb only ordinary conditions rather than an outage that coincides with an extreme move.
Source: CryptoSlate
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