With less than two weeks remaining until Ethereum's highly anticipated Merge event, ETH holders are actively positioning themselves to benefit from potential PoW fork tokens (ETHW). Many users are accumulating ETH through various means—including borrowing from lending protocols—which has created unintended consequences for decentralized finance platforms.
Why AAVE Suspended ETH Lending
AAVE initiated a pivotal governance vote on August 31st to address three critical risks:
- Liquidation Interference: Excessive ETH borrowing rates could destabilize protocol liquidation mechanisms
- stETH/ETH Position Instability: Rising borrowing costs may erase profitability for stETH collateral holders
- Price Divergence: Forced closures could widen the stETH-ETH peg deviation, triggering cascading liquidations
The proposal passed overwhelmingly on September 3rd, confirming AAVE will disable ETH borrowing before the Merge.
ETH POW Officials Issue Strategic Recommendations
The EthereumPoW (ETHW) team publicly endorsed AAVE's decision while forecasting broader industry impacts:
"AAVE's move to pause ETH borrowing establishes a precedent—we anticipate Compound and other lending protocols will implement similar protections. Users should proactively withdraw ETH from smart contracts to personal wallets for maximum flexibility during the transition."
Key Considerations for ETH Holders:
- Verify wallet compatibility with potential chain splits
- Monitor protocol announcements for withdrawal deadlines
- Assess tax implications of holding forked assets
FAQs: Navigating the Ethereum Merge
Q: When should I move my ETH off lending platforms?
A: Immediately—protocols may implement sudden freezes as merge timing finalizes.
Q: Will stETH remain liquid during the transition?
A: Liquidity may fluctuate; Curve/Uniswap pools could experience temporary imbalances.
Q: How does this affect leveraged positions?
A: 👉 Review our risk management guide for strategies to hedge volatility.
Q: Can I still earn yield on ETH during the merge?
A: Native staking remains active, but CeFi/DeFi rates may become unpredictable.
Strategic Insights for Crypto Investors
While the Merge represents Ethereum's most significant upgrade, market participants should:
- Maintain cold storage options for core holdings
- Avoid overexposure to speculative fork tokens
- 👉 Diversify with institutional-grade tools during volatility
Disclaimer: Cryptocurrency investments carry substantial risk—including total loss of capital—due to extreme price volatility. Conduct thorough independent research before committing funds.