Analysis: If the price of ETH drops sharply, Aave may accumulate more bad debt due to liquidation failures
Odaily reported that well-known developer and Yuga Labs Vice President 0xQuit posted on X, stating that the situation with Aave is dire and continuing to deteriorate. The utilization rates of several lending pools have reached 100%, which has caused depositors to be "locked in" and the protocol to face further risk of bad debt. If the price of ETH drops and Aave cannot execute liquidations effectively—as is currently the case—it will result in inefficient liquidation and thus more bad debt. If these issues are not resolved quickly, the situation could snowball and grow even worse.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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