LlamaRisk Suggests Raising USDe Borrow Rates on Aave V3 Markets

LlamaRisk has proposed raising borrowing costs for Ethena's USDe on Aave V3 markets, affecting leveraged positions that recycle USDe into yield-bearing sUSDe.

The recommendation would increase USDe's base variable borrow rate from 5% to 6% on Core, Plasma, Monad, Mantle, and Avalanche. It also suggests reducing Slope1 by one percentage point across all deployments.

This change targets the spread between staking yield and Aave's borrowing cost, which has been exploited in a 'borrow-and-stake' loop with negative carry before incentives and other frictions.