Aave V3 on Ethereum: Zero Bad Debt - Canada Report

Zero Bad Debt in Aave V3 Ethereum Lending Market

Bank of Canada staff report detected that Aave V3 reported zero bad debt in the Ethereum lending market in 2024. Thanks to over-collateralization and automatic liquidations, lender losses were prevented. According to transaction data between January 27, 2023, and May 6, 2025, positions were liquidated before collateral values fell below the debt amount.

Aave V3 Design and Risk Management

Aave V3 design relies on automatic risk controls instead of traditional credit assessment; borrowers must deposit more collateral than they borrow, and liquidation occurs when the risk threshold is exceeded. However, this approach protects lenders while shifting risk to borrowers and limits capital efficiency compared to traditional systems. Check out our platform for AAVE detailed analysis. Recursive leverage accounted for 20% of total borrowing volume and 8.2% of transactions.

Liquidation Waves and the Role of Major Assets

Liquidations occurred in intense waves; four assets WETH, wstETH, WBTC, and weETH accounted for 90% of the total liquidation value. Borrower losses are between 5-10% with liquidation fees, and can reach 10-30% including missed gains from price recoveries. These data demonstrate Aave's robustness in ETH spot transactions.

Daily lending earnings, circulating supply, and borrowing volumes (USD) on Aave V3. Source: Bank of Canada

AAVE Current Price and Technical Indicators

Current AAVE price is 95.14 USD, showing +2.12% change in the last 24 hours. RSI at 35.07 is in the oversold region, but the overall trend is downward and Supertrend is bearish. Resistance above EMA 20: 103.5012 USD. Supports: S1 92.3233 (strong, 81% score), S2 88.8207. Resistances: R1 102.4378 (63% score), R2 95.9700. Check our futures page for AAVE futures transactions. This report reinforces AAVE's long-term reliability.