🏦 Aave bank run from the Kelp hack: $8B withdrawn in 48h, core market utilization 100%
The Kelp DAO incident did not just stop at $290M evaporated. The domino effect has spread to Aave, creating a true DeFi bank run. I think this is the biggest test for Aave's safety mechanism to date.
The sequence of events is quite classic:
→ Hacker exploited Kelp's LayerZero bridge, minting 116,500 fake rsETH without backing, worth about $293M (accounting for 18% of supply)
→ Fake rsETH was deposited into Aave V3 as collateral, borrowing $236M in real WETH
→ Kelp paused the contract, fake rsETH dropped sharply, leaving bad debt of about $177M to $200M on Aave
→ Aave froze the rsETH market and related WETH pools to prevent damage
But the news leaked, whales panicked and withdrew en masse:
→ Justin Sun withdrew 65,000 ETH (equivalent to $154M)
→ MEXC and many other whales followed suit
→ Total withdrawals from Aave in 24 to 48h exceeded $6B to $8B
As a result, core markets hit 100% utilization:
→ ETH/WETH
→ USDT around $3B
→ USDC around $2B to $2.4B
100% utilization means there is no available liquidity, you cannot directly withdraw your deposits. Many people had to sell aToken (aWETH, aUSDC) on Uniswap at a loss of 2 to 10%, or borrow other stablecoins (GHO, DAI) using trapped assets to withdraw indirectly at a cost of 10 to 25%.
📊 Personal assessment:
→ Aave lost about $8B TVL in 2 days, total DeFi TVL decreased by $13B, AAVE token dropped by 15% to 19%
→ Borrow rates for USDT and USDC jumped to 13% to 15%, a clear stress signal
→ Aave governance is being criticized for onboarding rsETH too easily, with rumors of conflict of interest
→ Bad debt of $200M is unclear who bears, may need to activate Umbrella safety module or slashing stkAAVE
Lessons I draw:
→ A reputable protocol like Aave can still be affected by contagion from a bridge hack in another project; the risks in DeFi are real
→ Not your keys, not your coins still holds true for DeFi, not just CEX
→ If you still have funds on Aave, I will check immediately, try to withdraw or prepare a backup plan via 1inch, Uniswap
Is anyone stuck in a position on Aave? Share how to exit, who knows we might help each other during this time.
$AAVE $ETH #DeFi
The Kelp DAO incident did not just stop at $290M evaporated. The domino effect has spread to Aave, creating a true DeFi bank run. I think this is the biggest test for Aave's safety mechanism to date.
The sequence of events is quite classic:
→ Hacker exploited Kelp's LayerZero bridge, minting 116,500 fake rsETH without backing, worth about $293M (accounting for 18% of supply)
→ Fake rsETH was deposited into Aave V3 as collateral, borrowing $236M in real WETH
→ Kelp paused the contract, fake rsETH dropped sharply, leaving bad debt of about $177M to $200M on Aave
→ Aave froze the rsETH market and related WETH pools to prevent damage
But the news leaked, whales panicked and withdrew en masse:
→ Justin Sun withdrew 65,000 ETH (equivalent to $154M)
→ MEXC and many other whales followed suit
→ Total withdrawals from Aave in 24 to 48h exceeded $6B to $8B
As a result, core markets hit 100% utilization:
→ ETH/WETH
→ USDT around $3B
→ USDC around $2B to $2.4B
100% utilization means there is no available liquidity, you cannot directly withdraw your deposits. Many people had to sell aToken (aWETH, aUSDC) on Uniswap at a loss of 2 to 10%, or borrow other stablecoins (GHO, DAI) using trapped assets to withdraw indirectly at a cost of 10 to 25%.
📊 Personal assessment:
→ Aave lost about $8B TVL in 2 days, total DeFi TVL decreased by $13B, AAVE token dropped by 15% to 19%
→ Borrow rates for USDT and USDC jumped to 13% to 15%, a clear stress signal
→ Aave governance is being criticized for onboarding rsETH too easily, with rumors of conflict of interest
→ Bad debt of $200M is unclear who bears, may need to activate Umbrella safety module or slashing stkAAVE
Lessons I draw:
→ A reputable protocol like Aave can still be affected by contagion from a bridge hack in another project; the risks in DeFi are real
→ Not your keys, not your coins still holds true for DeFi, not just CEX
→ If you still have funds on Aave, I will check immediately, try to withdraw or prepare a backup plan via 1inch, Uniswap
Is anyone stuck in a position on Aave? Share how to exit, who knows we might help each other during this time.
$AAVE $ETH #DeFi