Aave freezes stablecoin trading on Avalanche V3 as activity surges on CEXs

cointelegraph.com:

Lending protocol Aave has frozen stablecoins trading and set Loan-to-Value (LTV) ratio to zero in response to recent price volatility on stablecoins after the USD Coin depegged on March 11. 

According to the Aave's governance forum, the trading freeze follows an analysis from DeFi's risk manager company Gauntlet, recommending that all V2 and V3 markets should be temporarily paused.

"Setting LTV to 0 definitely helps everywhere, but on the Avalanche v3 Pool, given that cross-chain infrastructure doesn’t cover Avalanche, the Aave Guardian can act immediately. Setting LTV to 0 in practise discounts the “borrowing power” of the asset, without affecting the HF of any user position," noted one participant in the forum discussion. 

LTV is an important metric that determines how much credit you can secure using crypto as collateral. Expressed as a percentage, the ratio is calculated by dividing the amount of credit borrowed by the value of collateral.

Gauntlet's risk analysis examined the amount of insolvencies that might occur under different scenarios, considering that the price of USDC stabilizes, recovers, or declines significantly:

Centralized crypto exchanges have seen a surge in trading volume in the past hours following the Silicon Valley Bank (SVB) collapse on March 10, according to digital assets data provider Kaiko.

Two big $USDC markets on exchanges seeing heavy sell pressure and huge volumes in last 24 hoursDespite plenty of reassurance on crypto twitter, most investors still selling USDC at a big discount pic.twitter.com/W9uy2HHax4

Silicon Valley Bank was shut down by the California Department of Financial Protection and Innovation on March 11 after bank run triggered by the banks latest financial reports showing it