Jack Paul 
Liquidation risk on Monad and Arc
Some Aave loans backed by yield-bearing collateral are sitting close to liquidation, according to LlamaRisk reviews dated Oct. 9. The issue is not just the health factor. It is also what happens after a liquidator takes the collateral. On Monad and Arc, exits for PT-$AUSD and syrupUSDC can take time, require buyers, or need a bridge and a redemption queue. That gap matters when a position falls below a health factor of 1.
On Monad, PT-$AUSD suppliers had health factors from 1.01 to 1.18, with a median of 1.03. Most debt was $USDC, followed by USDT0. The collateral is PT-$AUSD-17DEC2026, a Pendle principal token. It represents a claim on $AUSD at maturity on Dec. 17. Before maturity, a liquidator cannot redeem it for the borrowed stablecoin. Pendle’s route sells PT into SY, then redeems SY into a supported output token. After maturity, PT can be redeemed into SY without that market sale. Any conversion into $USDC or USDT0 remains part of the process.
LlamaRisk said the Monad reserve’s 30 million PT supply cap was fully used on Oct. 9 and recommended raising it to 60 million PT. The cap controls token capacity, not exit liquidity. The Pendle pool was 47% PT and 53% SY, so a large sale would pull from the SY side. The December PT also uses a linear discount oracle on $AUSD/USD. That oracle can follow a predictable path toward maturity while the actual sale price depends on buyers. A liquidator would compare the 2.62% bonus in stablecoin E-mode with the cost of converting PT into debt token.
Arc concentration and redemption waits
On Arc, two syrupUSDC positions held about 97% of supplied syrupUSDC, with health factors of 1.02 and 1.01. All debt among syrupUSDC suppliers was $USDC. That concentration means a few accounts could dominate demand for an exit. Arc had 143.45 million $USDC in the Core Hub, with 83.82 million drawn and 59.63 million available. That available balance is Aave debt-token inventory, separate from the cash available to Maple redemptions. LlamaRisk proposed raising the Maple Spoke draw cap from 23 million to 46 million and its syrupUSDC add cap from 25 million to 50 million shares.
A September Arc review found one local Uniswap V4 syrupUSDC/$USDC venue. Its proceeds saturated near $500,000 as the $USDC side ran out. There is no native Arc redemption. A holder can sell locally or bridge to Ethereum and then request redemption. The bridge transfer was estimated at two to five minutes under normal conditions, with throughput around $10 million an hour. Maple’s withdrawal queue adds another wait. Requests are first-in, first-out. Most withdrawals take under 24 hours, but some can take up to 30 days.
If liquidation happens, can the collateral be sold or redeemed for enough to repay the debt and cover costs? On Monad, that depends on a market sale before December maturity. On Arc, it depends on local buyers or an Ethereum exit with bridge capacity, redemption cash, and financing for the wait.