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Aave pauses lending markets for 17 Ethereum-based tokens

Aave pauses lending markets for 17 Ethereum-based tokens
  • Aave has temporarily frozen the credit markets for 17 tokens and stablecoins on Ethereum. 
  • This comes after a massive short position in Aave’s CRV market resulted in a $1.6 million bad debt.

Decentralized lending protocol Aave has temporarily frozen lending markets for 17 tokens to protect against evil debt takeover from future market manipulation attacks. Aave is the most prominent lending protocol on Ethereum, with over $3.65 billion in multi-chain assets. Their decision to suspend lending of various tokens on Aave version 2.0 was approved after members of the government agreed to a proposal by Llama and Chaos Labs calling for the pausing of assets deemed “volatile” due to low liquidity profiles. 

The credit markets are yearned for finance, Curve DAO, 0x, Decentraland, 1inch, Basic Attention Token, Ampleforth, DeFi Pulse Index, renFIL and Maker, Enjin, xSUSHI, and five stablecoins: USD, GUSD, RAI, USDP, and LUSD. The protocol will not allow users to deposit or borrow from these assets on the platform for risk management reasons. “In response to recent market events and the ongoing decrease in liquidity, this proposal aims to reduce risk. Profile at many higher volatile assets,” the suggestion read.

The proposal was approved days after a trader opened a massive short position in the Curve DAO (CRV) market in Aave, resulting in a $1.6 million bad debt for the record. Last week, a trader borrowed 92 million CRVs ($57 million) on Aave and continued to sell the tokens continuously, causing the price of CRV to fall sharply. However, the trader suffered price pressure as the CRV token surged. During the liquidation of the short position, Aave accumulated a bad debt of $1.6 million. Although Aave stated that it has enough funds to recover bad debts, the project aims to prevent such incidents by freezing funds from illiquid assets.

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