Aave Borrowing Costs for USDC and USDT Drop Amid Liquidity Recovery

Borrowing costs for USDC and USDT on Aave have decreased to 5% or less annually, a significant drop from the 13%–14% rates observed last month. According to NS3.AI, this reduction follows the liquidity strain caused by the KelpDAO hack. The liquidity squeeze began when large investors, known as whales, withdrew millions in coins from Aave, leading to a shortage of stablecoin liquidity in borrowing pools. The situation began to normalize after Aave governance proposed measures and secured over $160 million in relief funding.