Two Aave positions hold 97% of Arc's supplied syrupUSDC with cushions of about 2% and 1%

A health factor compares threshold-adjusted collateral value with debt, and a position becomes eligible for liquidation below 1 ^[1]. That converts into a price cushion directly: collateral value can fall by 1 minus 1/HF before the line is crossed, with debt held constant. At the Monad median of 1.03 the cushion is about 2.9% on the oracle's valuation (the valuation that establishes collateral value inside Aave) ^[17][13]. At the 1.18 top of the range it is about 15.3%, and at the 1.01 bottom about 1.0% ^[18]. The two Arc positions come out at about 2.0% and 1.0% ^[19].

Set the Monad median against the incentive. LlamaRisk's Oct. 2 launch recommendation for the stablecoin E-mode specified a 2.62% liquidation bonus ^[14], about 0.3 percentage points under the median cushion ^[21]. The liquidator supplies the borrowed stablecoin first and receives the collateral plus that incentive. It then has to recover enough from the collateral to cover the debt it repaid, the fees for trading and converting, and whatever it costs to fund a wait for redemption ^[15]. Before the Dec. 17 maturity ^[7], the Pendle route sells PT into SY and redeems SY into a supported token, with any further conversion into the borrowed stablecoin still to come ^[10]. CryptoSlate's account does not include a sale quote at any size, so whether 2.62% covers that route cannot be computed from what has been published.

Arc has a different exit and a tighter concentration. syrupUSDC there is a bridged share of Maple's Ethereum yield-bearing vault ^[2]. A liquidator who seizes it can sell locally, or bridge to Ethereum and redeem through a Maple withdrawal queue that depends on Maple's liquidity ^[2]. The financing of that wait falls on the liquidator ^[15]. Because the two positions hold about 97% of supplied syrupUSDC ^[6], liquidating both would put nearly the whole balance through one of those exits.

We think exit depth decides whether these loans clear cleanly, and the health factor does not measure it. The counter-case is that these are correlated pairs. Aave notes that lower health factors may be appropriate for correlated assets, and borrowers pair them because smaller relative price changes can support higher leverage ^[3]. PT-AUSD is a claim on AUSD at its Dec. 17 maturity ^[7], with USDC as the dominant debt asset ^[5], so a 1.03 median may be intended by the borrowers who hold it.

The view fails if a quote for selling PT at the 30 million cap size costs less than 2.62%, or if Maple's queue clears inside a liquidator's financing window. The Oct. 9 reviews recommend larger caps on both chains ^[16], including 60 million PT on Monad, double the current 30 million ^[8][20].