The business problem
A company that holds crypto or stablecoins in its treasury and borrows against them on Aave takes on a risk that does not exist in a bank loan: liquidation is automatic, and it happens around the clock. There is no call from an account manager. If collateral prices drop far enough, a third party repays part of the debt and takes collateral at a discount.
The cost is concrete. In a standard Aave liquidation, a liquidator can seize up to 50% of the position under the default close factor, with a liquidation penalty often around 5% applied to that whole block. For a treasury, that means an unplanned forced sale at the worst possible price.
The one metric to track
Aave expresses risk as a single number, the health factor: total collateral value multiplied by the weighted average liquidation threshold, divided by total borrowed value. Once it falls below 1, the position can be liquidated.
For a finance team, the more useful translation is the liquidation price: the collateral price at which the health factor reaches 1. "We get liquidated if ETH drops to X" is a sentence a CFO can act on. "HF is 1.4" is not.
Why a dashboard is not a control
Checking the Aave UI once a day is not risk management. A dashboard only shows the health factor at the moment someone looks; if the drawdown happens overnight, the liquidation may already have settled on chain by the next check. Monitoring has to push information to someone, or act on its own.
Existing options
The market already covers this. The choice is between two categories.
1. Alerts: someone gets notified, a human acts
- Otomato — paste a wallet address in read-only mode; it detects the Aave positions and alerts via Telegram or its app as the health factor approaches liquidation. No wallet connection, no signatures.
- Aave DeFi Watcher (browser extension) — covers Aave V2, V3 and V4 across Ethereum, Arbitrum, Optimism, Base, Polygon and Avalanche, with desktop notifications for health factor alerts. Fully read-only; never asks to connect a wallet. Limitation: it only works while a browser is open.
2. Automated protection: the system acts
- DeFi Saver Automation — with auto-repay enabled, it automatically unwinds part of the position when markets drop. It requires moving the position to a Safe smart wallet and triggers specific contract calls only when user-set thresholds are hit, keeping custody with the user. Their own case study reports 382 automated repay actions on Aave V3 during a selloff between January 25 and February 9. Check current minimum debt requirements and fees before adopting.
How to choose
| Criterion | Alerts | Automated protection |
|---|---|---|
| Who acts | A person, within minutes | A contract, automatically |
| Setup | Paste an address | Migrate position to a smart wallet |
| Custody change | None | None, but a new contract layer |
| Fits when | Small positions, team available 24/7 | Material debt, no on-call coverage |
| Main risk | Nobody reacts in time | Automation sells collateral you wanted to keep |
The part tools don't solve: policy
Every option above needs decisions that belong to the business, not the software:
- Thresholds: at what health factor do you warn, and at what level do you act?
- Owner: who receives the alert, and who is the backup outside business hours?
- Action: repay debt, add collateral, or reduce the position? Is the capital for that pre-approved?
- Review: how often do thresholds get revisited as volatility changes?
Without that, an alert is just a notification nobody owns.
Working with Nimbotools: if your company holds crypto or stablecoins and borrows against them, we help define the risk policy first and then pick the monitoring setup that fits it. Let's talk.