Circle economist calls for Aave V3 rate hike as USDC liquidity dries up

Gordon Liao, chief economist at USDC issuer Circle, has called for structural adjustments to Aave's V3, including a significant interest rate hike, as its USDC liquidity nears depletion. He noted that liquidity in the Aave V3 Ethereum core pool has fallen by $60 million over the past 24 hours, a result of supply shrinking as redemptions have kept pace with withdrawal requests. Liao argued that current interest rate levels are failing to address the market's supply and demand imbalance. To restore on-chain market confidence and attract capital, he proposed using emergency powers to adjust certain parameters, which would then be finalized through a governance process.