TechFlow News, April 19: Monetsupply.eth, Strategy Lead of Spark Protocol, posted on X stating that in January this year, low-utilization assets such as rsETH were delisted and collateral types and protocol functionalities have since been continuously tightened. At the time, this move sparked strong backlash from users employing “ETH looped leverage.” Additionally, Spark has long imposed relatively high maximum interest rate caps on its ETH lending market. Over the past year, it ceded part of its business and revenue to Aave (whose ETH borrowing rate at one point dropped to 10% or lower). However, amid the current market crisis, this strategy has proven more prudent: SparkLend still maintains ample ETH withdrawal liquidity, whereas Aave is experiencing liquidity strain—or even “lock-ups”—across multiple chains, including Ethereum Mainnet, Arbitrum, and Base.
Monetsupply.eth further warned that, as ETH serves as a core collateral asset, when market utilization reaches 100%, collateral liquidations cannot execute normally. Liquidity depletion not only degrades depositors’ experience but may also pose systemic risk. Given Aave’s current liquidity shortage, a 15–20% drop in ETH’s price could trigger significant bad debt accumulation—compounded by potential fallout from the rsETH incident.
