Half of Aave’s debt sits in just 9% of positions built around one Ethereum correlation trade
Galaxy’s Aug. 7 snapshot of Aave V3 Core found 19,073 loans. Fewer than 9% are in E-mode, but they account for about half of total debt and are heavily concentrated in leveraged Ethereum staking-basis trades. That cohort has a debt-weighted LTV near 90%, a health factor around 1.06, and debt-to-equity near 10.7x, versus roughly 49%, 1.79, and 1.07x for standard loans. About 66.2% of collateral is in ETH staking/restaking wrappers such as weETH, rsETH, and wstETH, while WETH is about 73% of the debt. The key risk is not ETH’s price alone, but the wrapper-to-ETH basis: if wrappers trade at a discount while WETH debt stays fixed, health factors fall and liquidations begin below 1. Galaxy estimates the average E-mode position has only about 5.7% cushion, implying an 8%–9% basis discount could trigger stress. Overall crypto leverage is declining, but risk is becoming more concentrated in a smaller set of ETH-linked positions.
