Concentration of Aave Debt Raises Systemic Risk Amid Ethereum Correlation Trade

Aave's V3 Core has shown that nearly half of its outstanding debt is concentrated in just 8.91% of positions, all built around a single Ethereum correlation trade.

The analysis by Galaxy found that fewer than 9% of the protocol's loans are using Aave's E-mode setting, which accounts for roughly half of all outstanding debt on the platform.

The concentrated cohort is holding Ethereum staking and restaking wrappers, including weETH, rsETH, and wstETH, which make up about 66.2% of the collateral backing these loans, with weETH alone accounting for roughly 42%