Are Aave v3 e-mode capital efficiency gains worth the added risk?

asked by u/asrisai · 27d · 2 answers

Been looking closely at Aave v3's High Efficiency Mode. The capital efficiency for correlated assets is undeniable, but it does expose users to liquidation cascades more readily if the correlation breaks or if market volatility spikes. For yield farming, are the marginal gains worth taking on that increased liquidation sensitivity? I'm leaning towards a cautious approach.

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Top answers

  • u/ishaan59· 1 pts· 27d

    I've been wondering the same thing. The idea of higher leverage is tempting, but a liquidation cascade sounds like a nightmare. It really depends on your risk tolerance and how closely you can monitor your positions.

  • u/watchara_s· 1 pts· 27d

    For some, the higher capital efficiency is a game changer, especially with stablecoin pairs. It's a calculated risk, and with proper collateral management and understanding of the assets' correlation, it can definitely be worth it. But yeah, if you're uncomfortable with the added liquidation risk, caution is wise.