Aave borrowers faced up to 36% APR while a freeze blocked fresh collateral
During the Oct. 29 Binance hot-wallet incident, Aave froze affected reserves, blocking new deposits and borrowing while allowing repayments, withdrawals and liquidations. Borrowers continued accruing interest but could not add collateral through the frozen pools. Supplier withdrawals reduced available liquidity and raised utilization, driving annualized borrowing rates in major stablecoin reserves to 10%–36%. Risk adviser LlamaRisk recommended temporarily lowering the rate curve’s upper response to ease borrowers’ costs, then restoring prior settings once reserves reopened on Oct. 31, when new deposits could again help replenish liquidity. The episode exposed competing needs: lower rates help existing borrowers, while stronger yields can attract suppliers, but neither rate changes alone guarantees tokens are available for withdrawal.
