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Aave V3 Core debt concentration in Ethereum correlation positions

Galaxy says fewer than 9% of Aave V3 Core E-mode positions account for about half of the protocol’s outstanding debt, with liquidation risk tied to discounts between liquid staking tokens and ETH.

Reported · Written up by our desk · Market Structure

Galaxy’s Aug. 7 snapshot of Aave V3 Core found 19,073 loans after standard filters, with a key concentration emerging in a small share of positions tied to Ethereum’s staking setup.

CryptoSlate reports that fewer than 9% of positions using Aave’s E-mode setting account for roughly half of all outstanding debt on the platform, based on Galaxy’s analysis. Galaxy estimates the debt-weighted loan-to-value for this cohort at about 90%, an average health factor around 1.06, and a debt-to-equity ratio near 10.7 times.

Collateral for these E-mode loans is heavily linked to Ethereum staking and restaking wrappers, with about 66.2% of the collateral backed by liquid-staking tokens, including weETH at roughly 42%. On the debt side, WETH makes up about 73% of the group’s borrowed exposure.

According to Galaxy’s framework as described by CryptoSlate, the main risk is not necessarily ETH price movement, but the exchange rate between the wrappers and the ETH they represent. With an average E-mode health factor near 1.06, Galaxy calculates the built-in cushion as roughly 5.7% before reaching the liquidation eligibility threshold, implying that discounts in the high single digits, around 8% to 9%, could push the average E-mode health factor toward 1.

Latest closeEthereum $1,917.70 ▲0.3%

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