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Aave lowered the utilization threshold at which USDT borrowing rates begin rising sharply to 92% from 94% in the Ethereum core market. The utilization rate refers to the share of deposited USDT that has been lent out.
Under the change, borrowing costs will climb faster once 92% of total deposits are loaned out. The structure can curb excessive borrowing demand by raising loan costs, while also encouraging additional inflows through higher deposit yields.
At a 94% utilization rate, the annual borrowing rate rises to 7% from 4.5%, and it climbs to 14.5% if utilization reaches 100%. According to risk management firm LlamaRisk, lowering the threshold to 92% from 94% would leave about 57.84 million more USDT unlent, based on total deposits of about 2.8922 billion USDT.