Aave's WETH unfreeze hands leverage to whales and illiquidity to everyone else

Aave reopened its Core WETH market amid strained liquidity, a move Spark strategist MonetSupply calls “ill‑considered.” With aEthWETH at 100% utilization, MonetSupply warns that LST/LRT holders can create recursive weETH leverage loops that chase roughly 45% annualized returns (stacked on staking yield) by exploiting a ~0.5% weETH discount and ETH borrowing rates capped near 5.15%. The result: arbitrage and carry capture for sophisticated players, while ordinary depositors and stablecoin borrowers face effectively blocked exits, higher liquidation risk and further degradation of pool liquidity. The decision increases tail‑risk for retail users and could amplify deleveraging cascades.