This is an archive of our post on Aave governance forum. Read the full thread here.

We also support increasing the LTV and LT on Arbitrum if it serves a strategic purpose. We note that there is approximately $1.3M worth of liquidity within the liquidation bonus (10%).

Source: AAVE to ETH Token Swap Modelling, DeFiLlama Liquidity, February 11th, 2025

We also note that the supply cap might need to be raised if users transition to Arbitrum to benefit from more permissive parameters. In such a case, current liquidity provision indicates that a supply cap increase would be feasible.

Source: onaave, February 11th, 2025

Below we show a simulation of a 30% AAVE drawdown under current (70%) and proposed (75%) LT.

Simulation of 30% drawdown at current LT (70%), Chaos Labs, February 11th, 2025

Simulation of 30% drawdown at proposed LT (75%), Chaos Labs, February 11th, 2025

We will update our proposed parameters in the original recommendation.