Bhutan Sovereign Wealth Fund faces risk warning on Aave

The position of Bhutan’s sovereign wealth fund, Druk Holdings, on the DeFi lending protocol Aave has recently faced significant risks. According to NS3, the fund’s loan health factor has fallen below 1.2, just one step away from triggering automatic liquidation. The direct cause of this risk is the sharp volatility in Ethereum prices, which have recently dropped to $2.11K.

Specific Position Risks of the Bhutan Fund

Druk Holdings holds 116,560 stETH (staked Ethereum derivatives) on Aave, with the main wallet concentrated with 104,000 stETH as collateral, corresponding to a lending scale of 200 million USDT. As ETH prices fell from $2800 to $2110, the collateral value of these stETH tokens has significantly decreased, with unrealized losses exceeding 10% of the original purchase cost.

Warning Signs from the Health Factor

In DeFi lending markets like Aave, the health factor is a key indicator of account safety. A health factor of 1.2 means the collateral assets are under extreme stress relative to the borrowed funds, and any slight price decline could trigger forced liquidation. For large institutional investors holding substantial positions, the risk factor increases exponentially.

Sovereign Wealth Fund’s DeFi Experiment

As one of the first national sovereign wealth funds to enter the DeFi market, Druk Holdings’ recent risk fluctuations also reflect the delicate balance large institutions must maintain between high returns and high risks. The Bhutan fund’s involvement in DeFi was once seen as a hallmark of institutional entry, but the current predicament also serves as a reminder to market participants: even government-level funds cannot avoid the volatility of the crypto market.