Aave Suspends ETH Loans As Ethereum Merge Approaches
Aave protocol struggling to climb above $90 l Source: AAVEUSDT on TradingView.com Some ETH miners are fighting for the chain to be split into a proof-of-stake and proof-of-work. This is so that the proof-of-work chain will have ETHPOW as the native token to enable free ETH distribution to holders. This may be the reason for increased ETH borrowing to increase Ether balance. A Binance.US researcher, Lan Unsworth, iniulat that users borrow Ether from lending protocols, especially Aave. Bobby Ong expects that the elevated utilization rate will jump from 70% to 100% if the lending continues. Significance Of High Utilization Lan Solot, a partner at TagusCapital, a crypto hedge fund, made a striking remark. He said that the borrowing pause was a great move. However, liquidating ETH borrowers when the market is volatile will become difficult due to scarcity caused by high utilization. An increase in utilization to 100% will result in lending out almost all ETH. This will leave no collateral for liquidators to process regular liquidations of ETH borrow-base positions. Liquidation, according to Aave, is a process that occurs when a borrowers health factor is below 1. It happens when collateral value is not able to cover the loan value. Liquidators will be forced to