TL;DR:
Massive outflows from ETFs accelerates deleveraging with a $1.2B drop in high risk loans
Deleveraging opens available liquidity for both stables and ETH
Liquidations on the rise to nearly ~$250M due to price volatility
Featured Dashboard: Aave Horizon
Risk Pulse and Radar Highlights
Source: Aave Risk Pulse
Horizon live alerts now available on Sentora’s Risk Pulse notification system
Use the alert system to track the growth and large transactions in the market
Stablecoin liquidity changes are already active, following liquidity can help users optimize their positions
Current Event Risks
Market-Wide Deleveraging & ETF Feedback Loops
Over the last month, the October liquidation shock has matured into a broader risk-off move. Spot BTC ETFs that were major inflow channels earlier in the year have flipped into persistent net outflows, with redemptions forcing issuers to sell underlying BTC into already thin order books. Instead of dampening volatility, ETF redemptions are now acting as a mechanical accelerator for the sell-off, pushing prices through successive support levels and triggering collateral stress across the rest of the stack.
Source: DefiLlama
For risk teams, ETF flows have effectively become a macro lever on on-chain leverage: a bad ETF flow day upstream means lower BTC/ETH prices, tighter collateral cushions, and a higher probability of forced de-risking on lending protocols downstream. What looks like a traditional “fund flow story” on the surface is, in practice, the first leg of a larger deleveraging cycle that is now clearly visible in DeFi data.
Source: Sentora Risk Radar
On-chain, Sentora’s high-risk loan dataset shows that the same window has been marked by a broad, cross-protocol de-lever. Across Aave v3, Spark, Morpho, and Euler, aggregate high-risk loans fell from roughly $8.4B on 26 Oct to about $6.4B on 25 Nov, which is a ~24% reduction in one month. Aave v3 alone cut high-risk balances from about $7.0B to $5.5B (~$1.5B, or −21%), while Spark and Morpho reduced high-risk balances even more aggressively (around −46% and −77%, respectively).
Spot BTC ETFs have flipped from absorbing spot supply to exporting it back into the market via redemptions, reinforcing November’s sell-off.
Aggregate high-risk loans across Aave v3, Spark, Morpho, and Euler fell from ~$8.4B (26 Oct) to ~$6.4B (25 Nov), a ~24% drawdown.
Aave v3 high-risk loans declined from ~$7.0B to ~$5.5B (about −$1.5B, or −21%) over the same period.
Spark high-risk loans fell from ~$571M to ~$308M (~−46%), and Morpho from ~$642M to ~$150M (~−77%).
Feature Dashboard: Aave Horizon
Sentora’s new Risk Radar Dashboard for Aave Horizon brings risk analytics to institutional DeFi. Horizon is Aave’s institutional-focused instance highlighting tokenized real-world assets (RWAs) as collateral. It acts as a bridge between regulated, off-chain exposures and on-chain liquidity.
Follow along by accessing the Aave Risk Dashboard here.
Dependency
Source: Aave Horizon Risk Radar
With a strong focus on institutional depositors, understanding whale behavior is critical:
Large transactions (mints, borrows, redeems, and repays) can materially shift pool-level risk within a short window.
Tracking whale flows helps stablecoin suppliers gauge counterparty concentration, rollover risk, and potential liquidity squeezes
Ecosystem
Source: Aave Horizon Risk Radar
The health factor distribution charts for Aave Horizon provide a top-down view of the overall solvency and risk posture of institutional borrowers.
Growth in lower health factor buckets (e.g., HF ≤ 1.05) signals increasing fragility, with more positions close to liquidation.
Because institutions are the primary borrowers in Horizon, health factor distributions function as a real-time proxy for institutional risk-taking in DeFi.
Sentora’s Aave Horizon Risk Radar highlights these flows at a granular level so depositors can:
Identify concentrated borrower dependencies.
Monitor refinancing waves or large position exits.
Anticipate periods of heightened liquidity risk.
Stay informed, manage risks wisely, and stay liquid
Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice.
