Aave Sets Zero LTV for CRV, UNI Following Oracle Glitch
Aave has initiated a governance vote to set the loan-to-value (LTV) of several high-volatility tokens to zero, effectively removing them as collateral. DeFi researcher Ignas flagged that during the October 11 crash, oracles updated prices by 15%–50% in a single block and suffered delays, exposing the protocol to bad-debt risk. Chainlink’s on-chain price diverged by up to 58% from DEX rates, enabling roughly $200 000 in arbitrage. In the past three months, these assets generated only $14 000 in collateral income and low borrowing revenue (CRV’s annual yield is about $80 000). Ignas, as a delegate, voted in favor.
Bearish
Removing LTV for multiple volatile tokens will likely reduce demand for borrowing and collateral, driving down trading volumes for CRV, UNI and others. Traders must seek alternative collateral, potentially increasing sell pressure on these tokens. A similar oracle failure on Compound in 2022 led to sudden deleveraging and price drops. In the short term, this move could fuel volatility and lower liquidity. Over the long term, improved risk controls may bolster platform stability but at the cost of reduced market depth for the affected assets.