Aave lowers USDT utilization threshold to increase liquidity borrowing costs

CryptoSlate reported that Aave executed a change to its USDT interest rate model on its Ethereum Core market on October 21. The update lowered the pool utilization threshold at which borrowing rates for Tether's USDT escalate sharply from 94 percent down to 92 percent. [1]

The change was executed in Ethereum block 26,241,799 following an October 20 recommendation by decentralized finance risk service provider LlamaRisk, CryptoSlate reported. LlamaRisk modeled that the new threshold corresponds to approximately 57.8 million USDT in additional unborrowed liquidity. The adjustment aims to encourage higher withdrawal headroom by raising borrowing costs earlier, though user exits remain dependent on available pool cash. [1]

Tether Limited issues the USDT stablecoin, which is pegged 1:1 to traditional currencies and has over $170 billion in circulation. The modification follows earlier liquidity adjustments by the protocol. As FTMQ Crypto reported earlier, Aave previously raised its GHO core borrowing rate to 4.5 percent to realign borrowing costs after stablecoin reserves declined. [2][3]