we're now seeing some negative secondary effects of illiquidity in Aave stablecoin markets (in this example, Aave Core USDT on Ethereum)

because users cant withdraw due to 100% utilization, there has been a ~$300 million increase in borrowing with USDT collateral in just the past day since the rsETH exploit

with a 75% max LTV, users with stuck USDT deposits can take out up to 3/4 of the value of their aave position. but this ends up reducing liquidity in other markets, with USDC and USDe markets now at 100% utilization as well

i think aave should consider immediately prevent new borrowing with illiquid collateral assets (eg setting LTV=0 for USDT, USDC, USDe on Aave Core, and relevant assets on other markets/chains, or alternatively disabling borrows across the board on all assets)