Aave TVL Plunges $9B Within 48 Hours Amid KelpDAO’s Exploit

A sharp liquidity shock has hit the decentralized finance (DeFi) ecosystem, with Aave alone losing nearly $9 billion in TVL in just 48 hours. 

The disruption, triggered by an exploit linked to KelpDAO, quickly cascaded across the ecosystem. As a result, total DeFi TVL plunged by more than $13 billion, falling from roughly $99.49 billion to $85.80 billion.

Key Points 

• Aave lost nearly $9 billion in total value locked (TVL) within 48 hours following an exploit involving KelpDAO. 
• Large investors and institutions, including MEXC and Abraxas Capital, were behind these withdrawals. 
• Total DeFi TVL dropped by over $13 billion, falling from about $99.49 billion to $85.80 billion. 
• AAVE’s price also reflected the decline, plunging 5% over the past week to $92.

Over $13B Withdrawn from DeFi Platforms Amid KelpDAO Exploit

The crisis began with a $292 million exploit involving KelpDAO’s bridge, where attackers accessed unbacked rsETH tokens over the weekend.

Afterward, they deposited these compromised tokens, typically used as liquid restaking collateral, into lending platforms like Aave.

Using this invalid collateral, the exploiter borrowed more than 82,600 Ethereum (ETH), leaving protocols exposed to bad debt once the collateral’s legitimacy came into question. In effect, analysts suggested the attackers secured loans using assets with no real backing.

As the issue unfolded, DeFi platforms began freezing affected markets. At the same time, large investors and institutions rapidly withdrew funds to minimize exposure, thereby accelerating liquidity outflows. 

Aave’s TVL Slides by Nearly $9B

Before the incident, Aave’s TVL stood at approximately $26.39 billion. It has since dropped sharply to around $17.52 billion, a decline of $8.87 billion in two days, according to data from DefiLlama. 

Data from Lookonchain shows that major entities led the withdrawals. Notably, MEXC pulled $431 million, a wallet linked to Nonco withdrew about $405 million, and Abraxas Capital removed roughly $392 million. In addition, several large holders exited their positions, contributing to a nearly $9 billion decline in Aave’s TVL.

Meanwhile, the impact spread beyond Aave. Other protocols, including Euler Finance and Sentora, also recorded significant losses, particularly in lending, restaking, and yield strategies tied to the affected collateral. 

AAVE Price Reacts to Market Stress

Capital outflows have also influenced AAVE’s price. Over the past week, the token has declined by about 5.34%, trading near $92.54. Although it posted a slight 0.93% gain in the last 24 hours, it remains down 17.29% over the past 30 days.

In response, Aave issued an update reassuring users that rsETH remains fully backed on the Ethereum mainnet. However, as a precaution, the protocol has frozen the asset across its V3 and V4 markets while implementing measures to limit further exposure.