Aave has increased borrowing limits for Bitcoin- and Ether-linked assets across its V3 and V4 lending markets, allowing eligible users to borrow more against the same amount of collateral. The changes include higher loan-to-value ratios for Wrapped Bitcoin (WBTC) and Coinbase Wrapped Bitcoin (cbBTC) in Aave V3's Ethereum Core market.
The update was implemented through Aave governance proposal 536, with LlamaRisk responsible for the risk assessment and Aave Labs implementing the changes. The Ethereum transactions were executed on October 28, 2026, at 5:35 a.m. ET.
For WBTC and cbBTC borrowers in Ethereum Core, the maximum loan-to-value ratio increased from 73% to 81%. This represents approximately 11% more borrowing capacity against the same collateral value, although the amount users can actually borrow still depends on available liquidity, borrowing caps and their position's health factor.
Bitcoin-Backed Borrowing Limits Increase
The revised parameters allow borrowers to access more liquidity without first adding more collateral. Loan-to-value, or LTV, measures the maximum borrowing amount relative to the value of supplied collateral. A higher LTV generally allows a user to borrow more, but it can also leave less room for the collateral's market price to decline before the position approaches liquidation.
The changes cover Aave V3 markets on Ethereum Core, Arbitrum and Base. On Ethereum Core, WBTC and cbBTC now have an 81% LTV and an 85% liquidation threshold. On Arbitrum, WBTC's LTV rises from 73% to 78%, with its liquidation threshold increasing to 82%. On Base, cbBTC's LTV rises to 81% and its liquidation threshold to 84%.
Base also receives a reduction in the standard cbBTC liquidation bonus, from 7.5% to 6%. A liquidation bonus is the additional collateral value a liquidator can receive for liquidating an eligible undercollateralized position.
The full proposed parameter changes and their risk rationale are available in the Aave governance forum's collateral-efficiency proposal.
Ether-Linked Assets Also Receive Higher Limits
The revisions extend beyond Bitcoin-linked collateral. On Aave V3, Wrapped Ether (WETH) moves to an 81% LTV and an 84% liquidation threshold across Ethereum Core, Arbitrum and Base. Ethereum Core also receives higher limits for liquid staking and restaking-related Ether tokens.
For Wrapped staked Ether (wstETH), the Ethereum Core LTV rises from 78.5% to 79%, while its liquidation threshold increases from 81% to 82%. For Ether.fi's weETH, the LTV increases from 77.5% to 78%, and the liquidation threshold moves from 80% to 81%.
Aave V4's Ethereum Main Spoke, a separately configured borrowing market within the protocol's hub-and-spoke design, also receives higher collateral factors. WETH increases from 83% to 84%, wstETH from 80% to 82%, and weETH from 80% to 81%. The collateral factor for both WBTC and cbBTC rises from 78% to 85%.
These parameters determine how much borrowing a supported asset can back within each market. Users should check the relevant market rather than assume that the same collateral settings apply across every Aave deployment.
Why Liquidation Thresholds Matter
Aave's higher borrowing limits create an important trade-off for users who borrow close to the new maximum. The LTV determines how much a user can borrow initially, while the liquidation threshold determines when a position becomes eligible for liquidation as its collateral value falls relative to its debt.
For WBTC and cbBTC in Ethereum Core, the gap between the LTV and liquidation threshold narrows from five percentage points to four. Under a simplified scenario in which a borrower uses the full borrowing limit, the debt value remains unchanged and accrued interest is excluded, a collateral-price decline of roughly 4.7% could bring the position to its liquidation boundary. Under the previous settings, the comparable decline was about 6.4%.
These figures are illustrative calculations based on the stated parameters, not guaranteed liquidation outcomes. Actual results can depend on debt balances, interest accrual, market prices, oracle updates, liquidity and liquidation execution. Borrowers should not interpret a higher borrowing limit as a reduction in risk.
Risk Assessment Behind the Changes
LlamaRisk's assessment used historical price movements, oracle-update behavior and observed liquidation processing to calibrate the proposed collateral settings. Its methodology examined adverse price movements over a one-hour window and considered the liquidation bonus associated with each asset and market.
The assessment also identified residual risks if unusually large price movements coincide with disruptions to price updates and liquidation processing. Although the revised parameters are intended to balance borrowing efficiency with risk controls, they cannot eliminate the possibility of liquidation or losses.
Aave's official FAQ explains that borrowing capacity depends not only on collateral value but also on available liquidity, asset borrow caps and a position's health factor. Users can review current collateral settings through Aave's risk parameters dashboard.
What the Update Means for Aave Users
The parameter changes expand the amount eligible borrowers may be able to access against supported Bitcoin- and Ether-linked collateral across selected Aave markets. They also show how decentralized finance lending protocols adjust risk parameters as their risk assessments evolve.
However, the maximum available borrowing amount is not necessarily the amount a user can safely borrow. Using a higher LTV can increase exposure to liquidation if collateral prices fall, while market-specific settings and available liquidity continue to affect borrowing conditions.
For users considering a new or existing Aave position, the relevant market's current parameters, debt balance and health factor remain important considerations. The changes provide additional borrowing capacity, but borrowers remain responsible for understanding the risks associated with leveraged positions.
