Post #2304

Aave hitting 100% utilization across core markets is what a real liquidity crunch looks like. Roughly $5B in USDT and USDC can’t be withdrawn after whales pulled billions post-rsETH exploit, leaving late depositors stuck while exit liquidity vanished in hours. At full utilization, liquidations break down. If prices move, the protocol cannot unwind positions, which increases the chance of new bad debt on top of the ~$200M already in question. This changes how risk gets priced in DeFi. Yield no longer compensates only for smart contract risk, it now includes liquidity lock risk, governance decisions, and how fast large players can drain a market.