Aave Lowers USDT Utilization Kink From 94% to 92%

Aave on October 21 lowered the "kink," or optimal utilization point, of its USDT interest rate curve on the Ethereum Core market from 94% to 92%. Risk provider LlamaRisk recommended the change on October 20, and it was executed on Ethereum the next day.

Details

The base rate and slopes are unchanged, so the borrow rate at the kink stays at 4.5% APR. According to the governance post, at the current 85.6% utilization the variable borrow rate rises from 4.10% to 4.19% APR, and the supply rate from 3.16% to 3.22%. The change converts some borrowing capacity into withdrawal liquidity: the buffer at the kink grows by about 57.8M USDT, while borrow headroom shrinks by the same amount.

CryptoSlate calculates that at 94% utilization the new curve implies 7% instead of 4.5%, meaning a 1M USDT loan would cost roughly 25,000 USDT more per year. As of October 23, about 391.4M USDT of cash sat in the aToken contract.

What it means for the market

At today's utilization the rate change is small, but the pool becomes more resilient to a rush of withdrawals: borrowers are nudged to repay sooner and suppliers to deposit. Actual withdrawals remain limited by free liquidity in the pool. We previously covered the shrinking Aave Umbrella backstop. More on the token on the Aave page.

This is not investment advice.