Aave positions backed by yield-bearing collateral on Monad and Arc operated with thin liquidation margins as of October 9, according to LlamaRisk snapshots and recommendations released that day. The risk assessment firm flagged structural constraints that could delay cash recovery during forced sales of collateral.
On Monad, loans collateralized by PT-AUSD (a Pendle principal token maturing December 17, 2026) showed health factors ranging from 1.01 to 1.18 among top suppliers, with a median of 1.03. Health factors below 1.0 trigger liquidation eligibility. LlamaRisk had recommended a 95% liquidation threshold and 2.62% stablecoin E-mode bonus for PT-AUSD on October 2. The 30 million PT-AUSD supply cap on Monad was fully utilized by October 9, and LlamaRisk recommended increasing it to 60 million.
The liquidation pathway for PT-AUSD creates exit bottlenecks. Before maturity, Pendle’s liquidation process sells PT into SY (standardized yield wrapper), then redeems SY into a supported output token. After maturity on December 17, 2026, PT can be redeemed into SY without a market sale. PT-AUSD uses a linear discount oracle on AUSD/USD that follows a predictable path toward maturity independent of AMM prices. Pendle’s pool composition stood at 47% PT and 53% SY, constraining the depth available for PT sales during liquidation.
On Arc, the Aave market on Monad, syrupUSDC positions (bridged shares in Maple’s Ethereum yield-bearing vault) showed acute concentration risk. The two largest syrupUSDC positions had health factors of 1.02 and 1.01 respectively, and held 97% of all supplied syrupUSDC. Arc’s syrupUSDC collateral factor was set at 92%, with a 4% dynamic liquidation bonus cap.
Arc syrupUSDC holders can sell locally or bridge to Ethereum for redemption through Maple’s withdrawal queue. Maple’s contract documentation states: “Most withdrawals take under 24 hours, but they can take up to 30 days.” The Maple Spoke draw cap on Arc was 23 million USDC and fully utilized on October 9; LlamaRisk recommended raising it to 46 million. The syrupUSDC add cap stood at 25 million with 87.8% utilization, and LlamaRisk recommended increasing it to 50 million. Arc’s Core Hub held 59.63 million USDC available, after 143.45 million added and 83.82 million drawn.
Bridge throughput to Ethereum was estimated at 10 million USDC hourly, with transfer times of 2 to 5 minutes. Uniswap V4’s syrupUSDC/USDC venue had a 500,000 saturation point. Arc’s Maple Spoke draws from the same Core Hub USDC reserve as the Main Spoke, placing Maple Spoke exposure within shared solvency risk.
During liquidation, a liquidator supplies the borrowed stablecoin, receives collateral, and must recover cash from it. Narrow health factors combined with constrained redemption queues and market depth mean liquidators face delays converting collateral to cash, potentially widening losses if prices move during the recovery window.
