GHO is minted against collateral supplied to Aave, which means it inherits the collateral standards, caps and risk analysis that make Aave the safest lending market in DeFi. On the solvency question there is little to worry about.
Why it traded below peg
GHO's borrow rate is set by governance rather than by market forces. Set too low, borrowers mint more GHO than the market wants to hold, and the price drifts below par — which is exactly what happened after launch. Governance raised the rate and added facilitators over subsequent months and the peg recovered. It was a monetary policy error rather than a collateral failure, and it took an uncomfortably long time to correct.
What that says about governance-set rates
A stablecoin whose supply responds to a committee-set rate needs that committee to be responsive. Aave's governance is deliberate and thorough, which is a virtue for lending parameters and a handicap for something that requires timely adjustment. The tension is structural.
Current position
Peg behaviour has been stable more recently, with liquidity concentrated around Aave's own ecosystem and specific Curve pools. Supply remains modest against the major stablecoins.
Who should use it
Aave borrowers wanting to mint against existing collateral at a governance-set rate. As a stablecoin to hold, its liquidity does not justify choosing it over USDC or USDS.