Aave vote would raise WBTC, cbBTC LTV to 81%

Aave governance is considering a proposal from risk service provider LlamaRisk to increase loan-to-value limits for wrapped Bitcoin on Aave V3 Ethereum Core. The proposal advanced to Snapshot on Sept. 21 and voting was expected to begin within 24 hours; the changes were proposed parameters and had not been implemented at the reporting cutoff.

Under the proposal, maximum LTV for WBTC and cbBTC on Ethereum Core would rise from 73% to 81% and their liquidation thresholds would increase from 78% to 85%. At 73% LTV, $100 of WBTC or cbBTC supports up to $73 of debt; at 81% LTV the same collateral would support up to $81. Using a simplified single-asset calculation that holds debt constant, a maximally leveraged Bitcoin loan would face liquidation after roughly a 4.7% fall in BTC price.

The proposed changes extend to other networks and tokens. Arbitrum WBTC’s ordinary LTV would increase by five percentage points and Base cbBTC’s LTV by eight points. Ethereum Core WETH, wstETH and weETH would each receive a 0.5-point LTV increase. Selected liquidation thresholds would also rise. Base cbBTC’s liquidation bonus would be lowered from 7.5% to 6%, and a Base cbBTC stablecoin E-Mode is proposed at 82% LTV with an 85% liquidation threshold. The proposal notes these figures describe maximum borrowing capacity per dollar of eligible collateral and do not reveal how much additional debt users would take on.

LlamaRisk based the parameter changes on one year of liquidation data covering August 2025 through August 2026 across Ethereum Core, Arbitrum and Base. On Ethereum Core the analysis counted 7,206 ETH liquidations that seized $618 million and 2,621 BTC liquidations that seized $358 million. For both collateral families the value-weighted 99th-percentile time a liquidation call spent at or below its execution price was five minutes; the proposal treats that interval as a liquidation work-off window.

The study examined price-feed publications during February and October 2025 stress windows and reported that seized volume cleared within five minutes of the feed publication that made liquidation profitable in the markets reviewed. February produced no recognized deficit. October produced $0.39 million of event-level bad debt against roughly $128 million of stressed volume; the analysis states that none of that bad debt affected the ETH- or BTC-family collateral targeted by the current proposal.

LlamaRisk’s model combines a one-hour adverse price excursion with each reserve’s liquidation bonus to derive ceilings for liquidation thresholds. In its detailed table the 99.9th-percentile one-hour adverse move was 11.85% for ETH and about 5% for BTC. The same dataset contained larger extremes, including a worst one-hour ETH decline of 24.27% and a worst BTC decline around 10.7%. The proposal sets BTC thresholds below the model ceiling to account for market depth, reserve caps and concentration risk; WETH is placed at the model ceiling while wstETH and weETH sit one point inside their ceilings.

The proposal’s analysis assumes regular oracle updates and active liquidators. An hour that combines an unusually large market move with stalled price feeds, impaired liquidation activity or degraded market depth could produce outcomes different from the historical sample. The published proposal does not include a full dataset of current collateral-enabled balances, outstanding debt by asset or account health factors, so the aggregate credit effect of the parameter changes cannot be calculated from public materials.

If Snapshot returns a positive vote, a governance implementation AIP would follow. Until a formal vote result and any AIP are completed, the proposed 81% Bitcoin LTV and the other parameter changes remain proposals rather than live protocol settings.