Aave V3 guide
How borrowing a stablecoin on Aave works as a short on fiat
By the Tokenping teamPublished 14 min read
Short answer
When you borrow a dollar or euro stablecoin against bitcoin or ether on Aave, your debt is fixed in that currency and your collateral is not. If the collateral rises against the currency, because the crypto rises or because the currency loses value, the debt shrinks compared with what you hold: that is why some bitcoiners call it shorting fiat. It is a leveraged bet, though. If the collateral falls, the debt grows compared with it and the position can be liquidated, and the debt costs a variable rate: on 19 October 2026, about 4.58% a year for USDC and 4.12% for EURC on Aave's Ethereum Core market.
Applies to Aave V3.7, checked on the Ethereum Core, Arbitrum, Base, Optimism, Polygon, Avalanche and Gnosis markets. Other V3 markets and networks may run older versions. Aave V4 differences are noted where rules differ. Figures as of .
What does "shorting fiat" mean?
To short something is to owe it while holding something else, so that you gain when what you owe loses value against what you hold. A stablecoin loan has that shape. USDC and USDT track the US dollar and EURC tracks the euro, so a loan in one of them is a debt fixed in dollars or euros. The collateral, bitcoin or ether, has no fixed price in that currency.
So the loan is a short on the currency, measured against your collateral. In bitcoin terms, a 24,000 USDC debt is 0.3 BTC when bitcoin is at $80,000, 0.2 BTC at $120,000 and 0.5 BTC at $48,000. Seen the other way round, it is a leveraged long position in bitcoin against the dollar: you keep all of the collateral and owe a fixed number of dollars.
Two things follow from that:
- What counts is the exchange rate between your collateral and the currency, not inflation as such. Inflation helps only through that rate: if the dollar loses purchasing power and bitcoin keeps its own, bitcoin's dollar price rises and the debt shrinks in bitcoin. If bitcoin falls while the dollar inflates, the short still loses.
- The debt does not stay fixed. Interest is added from the moment you borrow (Aave help centre, Borrow Tokens), so the currency has to lose value against the collateral faster than the borrow rate before the short gains anything.
How the loan itself works on Aave, step by step, is in how crypto-backed loans work.
Who has argued for shorting fiat with a loan?
Two writers have published on borrowing against bitcoin instead of selling it: Juraj Bednár, who writes mostly in Slovak and frames it explicitly as shorting fiat, and Pavol Lupták, known as Wilder. The summaries below come from their own published pages; the numbers and risks in the rest of this guide are ours.
Juraj Bednár wrote on his blog in March 2023 that his book and his course explain how to borrow fiat against bitcoin, which he counts among the best uses of bitcoin. His argument is that borrowing fiat value is the same as shorting it, which puts the borrower on the right side of inflation: use the money while it still has its value and repay it after inflation has worn it down. He sums it up as "Nenadávajme, shortujme cez pôžičku" ("let's not complain, let's short through a loan"; Juraj Bednár's blog, 22 March 2023, fetched 19 Oct 2026). His English book on the subject, published in March 2024, presents the method in its subtitle as a way to short fiat currencies, and his Slovak minicourse covers loans on Aave and other platforms along with the risks of liquidation, wrapped bitcoin, counterparties and interest.
Pavol Lupták published a long guide in June 2026, last updated in October 2026, on living off a loan against bitcoin instead of selling it, through Aave, Morpho or Firefish. Its summary opens with "Don't sell your Bitcoin. Borrow stablecoins against it" (Pavol Lupták's guide on Liberation Travel, fetched 19 Oct 2026). It suggests euro debt for people who spend euros, so that a stronger dollar does not raise their debt, recommends a low loan-to-value and lists liquidation, smart contract and stablecoin risks. The guide makes its case as borrowing instead of selling rather than as a bet against a currency.
Why do people short fiat this way?
The inflation and debasement argument
Central banks aim for some inflation. The European Central Bank targets 2% over the medium term and the Czech National Bank 2%, and the ECB's own explainer says inflation reduces the value of a currency over time. In the last few years prices rose much faster than that: annual inflation peaked at 10.6% in the euro area in October 2022, reached 9.1% in the United States in June 2022 and 18.0% in the Czech Republic in September 2022. Someone who owes a currency gains in real terms when prices rise faster than the interest on the debt.
Lenders price that in, which is the catch. In September 2026 annual inflation was 3.8% in the euro area, 3.7% in the US and 2.5% in the Czech Republic, while on 19 October 2026 Aave's Ethereum Core market charged 4.58% a year for USDC and 4.12% for EURC. At those numbers the debt grows a little faster than prices, so inflation alone would not make the loan cheaper in real terms. The gain has to come from the collateral rising against the currency.
Keeping long-term holdings
The other reason is not wanting to sell. Someone who plans to hold bitcoin for years can borrow against it to pay for something now and keep the coins. The loan keeps all of the collateral's upside and all of its downside, adds interest, and brings the chance of a forced sale; how crypto-backed loans work covers that use and its trade-offs.
How do you set it up on Aave?
- Choose a market and the collateral. On Aave V3's Ethereum Core market, bitcoin comes as WBTC or cbBTC (both with an LTV of 73% and a liquidation threshold of 78% on 19 October 2026) and ether as WETH (80.5% and 83%). On Arbitrum, WETH (80% and 84%) and WBTC (73% and 78%) are listed and cbBTC is not. These bitcoin tokens are backed by bitcoin that a custodian holds or a bridge controls, which adds a risk that bitcoin in your own wallet does not have.
- Choose the currency you want to owe. USDC, USDT and GHO are dollar stablecoins; EURC is a euro stablecoin. The stablecoin you borrow is the currency you are short. The euro options are listed below.
- Supply the collateral and borrow well below the limit. The limit is the collateral's value times its LTV, and at the limit the health factor is only about 1.07 for WBTC. Sizing is covered below.
- Decide what the stablecoins are for. Spending them leaves you holding all of your bitcoin with a debt against it. Buying more bitcoin with them makes the bet bigger, so gains and losses both grow.
- Set an alert and know your liquidation price, as described at the end.
- Plan how you will close it. You repay in the stablecoin you borrowed, so you either buy it back or let Aave's interface sell part of your collateral and repay in one transaction (Aave docs, swap features). Either way, closing the short means selling some collateral or bringing in money from elsewhere.
Worked example: what happens to alice's position?
The prices here are round, hypothetical numbers; the protocol parameters were read on-chain on 19 October 2026.
alice supplies 1 WBTC on Aave's Ethereum Core market when bitcoin is at an illustrative $80,000 (Aave's oracle read $82,680.33 at Ethereum block 26225364). WBTC's LTV of 73% would let her borrow up to $58,400. She borrows 24,000 USDC, 30% of the collateral's value, and spends it. Instead, she could have sold 0.3 BTC for the same $24,000 and kept 0.7 BTC.
- Health factor: 80,000 × 0.78 ÷ 24,000 = 2.60.
- Liquidation price: 24,000 ÷ 0.78 = $30,769.23, a 61.5% fall.
- Interest: the USDC borrow rate was 4.58% a year (APY). If it stayed there, the debt would be about 25,099 USDC after a year. It won't stay exactly there, because it moves with how much of the market's USDC is borrowed.
After one year, at four bitcoin prices:
| Bitcoin after a year | Change | Debt (25,099 USDC) in BTC | Health factor | BTC left after repaying | Compared with selling 0.3 BTC at the start |
|---|---|---|---|---|---|
| $120,000 | +50% | 0.2092 | 3.73 | 0.7908 | 0.0908 BTC more |
| $88,889 | +11.1% (the dollar loses 10% against bitcoin) | 0.2824 | 2.76 | 0.7176 | 0.0176 BTC more |
| $80,000 | 0% | 0.3137 | 2.49 | 0.6863 | 0.0137 BTC less: the interest |
| $48,000 | −40% | 0.5229 | 1.49 | 0.4771 | 0.2229 BTC less |
Scroll sideways to see every column.
The first two rows are the short paying off: the debt shrinks in bitcoin terms. In the second row, the dollar's 10% fall against bitcoin covers the interest with something left over, but at 4.58% interest bitcoin has to rise about 4.6% in a year, to about $83,665, just for alice to come out level with having sold. The last row is the other side of the same bet: a 40% fall leaves her with 0.22 BTC less than if she had sold.
What a liquidation does to the same position
Now suppose bitcoin falls to $30,000 soon after alice borrows, before much interest has built up. Her health factor is 30,000 × 0.78 ÷ 24,000 = 0.975, below 1, so anyone can liquidate the position. Because it is above 0.95 and both her WBTC and her USDC debt are worth more than $2,000, one liquidation may repay up to 50% of the debt (Aave help centre):
- A liquidator repays 12,000 USDC of alice's debt.
- In return the liquidator takes WBTC worth that amount plus WBTC's 5% liquidation bonus on Ethereum Core: 12,000 × 1.05 ÷ 30,000 = 0.42 WBTC.
- alice is left with 0.58 WBTC ($17,400) and 12,000 USDC of debt, a health factor of 1.13.
Netted at $30,000, she holds 0.58 − 0.40 = 0.18 BTC, against 0.20 BTC had she not been liquidated and 0.70 BTC had she sold at the start. The liquidation cost her the bonus, 0.02 BTC or $600, and sold 0.42 BTC at the low. Had the health factor fallen to 0.95 or below first, the whole debt could have been repaid in one liquidation. What happens when your Aave position is liquidated covers the rules.
How much does the interest cost?
Aave V3's variable borrow rates on 19 October 2026 (Ethereum block 26225342, Arbitrum block 516228495), as yearly APY like the Aave app shows them:
| Market | Stablecoin | Currency | Borrow rate |
|---|---|---|---|
| Ethereum Core | USDC | US dollar | 4.58% |
| Ethereum Core | USDT | US dollar | 4.17% |
| Ethereum Core | GHO | US dollar | 4.60% |
| Ethereum Core | EURC | euro | 4.12% |
| Arbitrum | USDC | US dollar | 3.45% |
| Arbitrum | USD₮0 | US dollar | 4.21% |
| Arbitrum | GHO | US dollar | 4.59% |
Scroll sideways to see every column.
They are a snapshot. Rates follow how much of each asset is borrowed and parameters governance can change, and they can jump: on 14 October 2026 the USDC rate on Ethereum Core rose to 13.67% APR in one block and fell back about 36 minutes later (why your Aave health factor drops on its own).
In money, 24,000 USDC at 4.58% costs about 1,099 USDC a year. Interest also lowers the health factor while prices stand still, so a loan nobody touches drifts toward liquidation: alice's liquidation price moves from $30,769 to about $32,179 after a year.
How much should you borrow?
The less you borrow against the collateral, the further it can fall before liquidation. With one collateral asset and stablecoin debt, the health factor is the liquidation threshold divided by the share of the collateral's value you borrowed, and the fall that reaches liquidation is 1 − that share ÷ the threshold. For WBTC on Ethereum Core (threshold 78%), with bitcoin at $80,000:
| Borrowed, as a share of the collateral's value | Health factor | Bitcoin fall to liquidation | Liquidation price |
|---|---|---|---|
| 20% | 3.90 | 74.4% | $20,512.82 |
| 30% | 2.60 | 61.5% | $30,769.23 |
| 40% | 1.95 | 48.7% | $41,025.64 |
| 50% | 1.56 | 35.9% | $51,282.05 |
| 60% | 1.30 | 23.1% | $61,538.46 |
| 73% (the borrow limit) | 1.07 | 6.4% | $74,871.79 |
Scroll sideways to see every column.
Falls of that size have happened. Bitcoin peaked at about $69,000 in November 2021 and was at about $17,000 by mid-June 2022, a fall of about 75%, and it went below $16,000 after FTX failed in November 2022 (ECB blog). Even a 20% loan taken at the 2021 peak would have been liquidated by mid-June 2022. Interest makes the share grow over time, so a loan sized for today's price is not sized for next year's.
How much buffer to keep, and how to turn it into a number you can watch, is the subject of what a safe health factor on Aave is; for positions with more than one asset, see how to calculate your Aave liquidation price.
What about owing euros, or koruna?
Aave values everything in US dollars, so a dollar stablecoin loan is a short on the dollar against your collateral. If you earn and spend euros or koruna, it also leaves you exposed to the exchange rate: when the dollar strengthens, the debt grows in your own currency. Borrowing a euro stablecoin makes the loan a short on the euro instead.
On 19 October 2026 we read every Aave V3 market in the Aave Address Book, 26 markets on 23 networks, and all 20 Aave V4 Spokes that Aave's V4 API listed, on Ethereum, Avalanche, Arc and Base. These are the euro stablecoins listed on them:
| Where | Euro stablecoin | Open for new borrowing? | Borrow rate on 19 Oct 2026 |
|---|---|---|---|
| Aave V3 Ethereum Core | EURC | Yes | 4.12% APY |
| Aave V3 Base | EURC | Yes | 4.08% APY |
| Aave V3 Avalanche | EURC | Yes | 3.66% APY |
| Aave V3 Gnosis | EURe (Monerium) | Yes | 3.95% APY |
| Aave V3 Celo | EURm (Mento) | Yes, with a borrow cap of 90,000 EURm | 9.85% APY |
| Aave V3 Arbitrum | EURS | No, frozen | not applicable |
| Aave V3 Polygon | EURS, jEUR, EURA | No, frozen | not applicable |
| Aave V4 Spokes on Ethereum (Main, Bluechip, Forex, Gold), Avalanche (Main, Forex) and Arc (Main, Forex) | EURC | Yes | base rate 3.90% on Ethereum, 1.42% on Avalanche, 0.75% on Arc (APR) |
Scroll sideways to see every column.
A frozen asset takes no new supplies or borrows, but existing loans can still be repaid. On Aave V4 the rate you pay is the base rate plus a premium that depends on the risk of your collateral (Aave V4 overview); every collateral asset in those Spokes had a collateral risk of zero on 19 October 2026, so no premium was being added.
Two gaps stand out. Arbitrum has no euro stablecoin open for borrowing, and no market we read lists a Czech koruna stablecoin: no reserve on any of them had CZK or koruna in its name or symbol. On Aave, a Czech reader can owe dollars or euros, not koruna, so the loan always carries exchange-rate risk against the koruna.
In numbers: Aave's oracle valued EURC at $1.1199 on 19 October 2026 (Ethereum block 26225364), so a 20,000 EURC debt counted as $22,398 in the health factor. If the euro rose 10% against the dollar while bitcoin's dollar price held, the same debt would count as $24,638 and the health factor would fall by about 9%. With euro debt, the health factor follows the bitcoin price in euros. An existing loan can be switched from one stablecoin to another, for example from USDC to EURC, with the debt swap in Aave's interface (Aave docs, swap features).
How do alerts help with a position like this?
Nothing in Aave tells you when a short like this goes wrong, and once the health factor is below 1, liquidation bots compete to act first (Aave help centre). What you can do is choose the bitcoin price at which you would act, turn it into a health factor and get a message when the position reaches it. For alice, acting at $50,000 means a health factor of 50,000 × 0.78 ÷ 24,000 = 1.63. Tokenping checks every 5 minutes and messages you while your health factor is below the threshold you set; how to set up a health factor alert walks through it, and alerts cost 3 USDC per 30 days. An alert gives you time to act, not protection: how to avoid liquidation on Aave covers what to do with that time.
Sources
- Juraj Bednár: why he wrote the book "Kryptomeny", blog post in Slovak, 22 March 2023: borrowing fiat against bitcoin as a short on fiat (fetched 19 Oct 2026)
- Juraj Bednár: minicourse on using the value of bitcoin without selling it, in Slovak: platforms covered and the risks it lists (fetched 19 Oct 2026)
- Goodreads: How to harness the value of Bitcoin without having to sell it: subtitle and publication date, 7 March 2024 (fetched 19 Oct 2026)
- Pavol Lupták: How to Live Off a Crypto Loan Long-Term, Liberation Travel, published 26 June 2026, updated 15 October 2026 (fetched 19 Oct 2026)
- Aave V3 Ethereum Core PoolDataProvider and AaveOracle, Arbitrum PoolDataProvider: parameters and rates at Ethereum block 26225342 and Arbitrum block 516228495, WBTC $82,680.33 and EURC $1.1199 at Ethereum block 26225364 (RPC data fetched 19 Oct 2026)
- Aave Address Book and Aave's V4 API: the 26 Aave V3 markets and 20 Aave V4 Spokes read for euro and koruna stablecoins; every reserve's symbol and name, and the configuration and rate of each euro stablecoin found, read on-chain on 19 Oct 2026 (fetched 19 Oct 2026)
- Aave V4 overview: base rate and risk premium; Aave V4 Spokes and Hubs read on-chain on 19 Oct 2026 (fetched 19 Oct 2026)
- Aave Help: Borrow Tokens (fetched 19 Oct 2026)
- Aave Help: Health Factor & Liquidations (fetched 19 Oct 2026)
- Aave docs: swap features: repay with collateral and debt swap (fetched 19 Oct 2026)
- ECB: monetary policy strategy: the 2% target (fetched 19 Oct 2026)
- Czech National Bank: inflation target (fetched 19 Oct 2026)
- ECB explainer: What is inflation? (fetched 19 Oct 2026)
- ECB Economic Bulletin 5/2024: The dynamics of inflation differentials in the euro area: the 10.6% peak in October 2022 (fetched 19 Oct 2026)
- Eurostat: Annual inflation up to 3.8% in the euro area, 16 October 2026 (fetched 19 Oct 2026)
- US Bureau of Labor Statistics: consumer prices up 9.1 percent over the year ended June 2022, 18 July 2022 (fetched 19 Oct 2026)
- US Bureau of Labor Statistics: Consumer Price Index summary for September 2026, 14 October 2026 (fetched 19 Oct 2026)
- Czech Statistical Office: consumer price indices, September 2022, 11 October 2022 (fetched 19 Oct 2026)
- Czech Statistical Office: consumer price indices, September 2026, 13 October 2026 (fetched 19 Oct 2026)
- The ECB Blog: Bitcoin's last stand, 30 November 2022 (fetched 19 Oct 2026)
Educational content, not financial advice. Alerts reduce risk; they do not prevent liquidation.