LlamaRisk has proposed raising borrowing costs for Ethena’s USDe across five Aave V3 markets, a move that would make leveraged strategies involving the stablecoin and yield-bearing sUSDe less attractive.
The recommendation, published on 9 September, would lift USDe’s base variable borrow rate from 5% to 6% on Core, Plasma, Monad, Mantle and Avalanche. It would also reduce Slope1 by one percentage point on each deployment.
Based on the utilisation levels recorded in the proposal, the changes would increase estimated borrower APRs by between 13 and 89 basis points. The affected markets contain about $323.8 million in USDe debt, against $1.18 billion supplied.
| Aave V3 market | Utilisation | Current borrow APR | Proposed borrow APR | Increase |
||:|:|:|:|
| Core | 32.3% | 5.72% | 6.36% | 64 bps |
| Plasma | 22.4% | 5.79% | 6.53% | 74 bps |
| Monad | 17.2% | 5.57% | 6.38% | 81 bps |
| Mantle | 9.0% | 5.32% | 6.21% | 89 bps |
| Avalanche | 69.9% | 6.75% | 6.87% | 13 bps |
LlamaRisk said the figures were recommendations that would be introduced through the Risk Steward process.
The proposed increases vary because two elements of Aave’s interest-rate curve are being adjusted simultaneously. Raising the base rate increases borrowing costs, while the reduction in Slope1 offsets some of that rise depending on utilisation.
Avalanche, which had the highest utilisation in the snapshot, would receive the greatest offset and see its borrowing rate increase by 13 basis points. Mantle, with utilisation of 9.0%, would absorb almost the full effect of the higher base rate, resulting in an 89-basis-point rise.
The changes are aimed at leveraged sUSDe positions. TokenLogic’s staged repricing programme described a strategy in which borrowers take USDe from Aave and convert or recycle it into sUSDe, seeking to profit from the difference between staking returns and borrowing costs.
That programme said raising the minimum borrowing rate should reduce the scale of those positions. It also suggested the yield available to remaining sUSDe holders could move towards 5.3%, but only if supply funded through such loops unwinds.
By 10 September, Aavescan’s sUSDe snapshot showed a supply APY of 4.72%. Borrow APRs for USDe displayed on the Core, Plasma and Monad market pages were already above that level. The Mantle and Avalanche pages also showed borrowing rates above 4.72%, meaning a basic borrow-and-stake strategy had negative carry before incentives, transaction costs and other frictions were included.
The rates are not fixed and can change as utilisation moves. The APRs in the proposal therefore represent the expected impact under the market conditions recorded on 9 September, rather than permanent borrowing costs.
