Narrowing price cushions leave Bitcoin loans vulnerable to 4.7% price dips as Aave weighs higher leverage

Aave governance has advanced a proposal that would give Bitcoin-backed borrowers materially more leverage while leaving less room before liquidation.The proposal from risk service provider LlamaRisk would let users on Aave V3 Ethereum Core borrow as much as $0.81 against each $1 of WBTC or cbBTC collateral, up from $0.73. The liquidation threshold would rise from 78% to 85%.LlamaRisk said on Sept. 21 that the proposal had advanced to Snapshot and voting would begin in less than 24 hours. The vote result and any implementation remained unverified at the reporting cutoff, so the higher limits are proposed parameters rather than live settings.The case rests on one year of liquidation data showing that economically meaningful positions generally cleared within minutes. That history was recorded under existing parameters. It supports an argument for greater capital efficiency but cannot establish how the proposed settings would perform during the next extreme move.Eight more cents of Bitcoin borrowing powerLoan-to-value, or LTV, sets the maximum debt that collateral can support. At 73% LTV, $100 of WBTC or cbBTC can support up to $73 of debt before reserve caps, available liquidity, ass...