A recent $292 million hack affecting Kelp DAO, a platform for restaking cryptocurrency, has caused significant problems for the broader decentralized finance (DeFi) sector and shaken investor confidence. Aave, a major lending platform, has been particularly impacted by the fallout.
Over the weekend, the price of Aave’s token (AAVE) dropped around 26%. At the same time, the amount of money held within the Aave protocol decreased significantly, and continued withdrawals made the situation worse.
Kelp DAO Hack Sparks Aave Crisis
The attack started when the perpetrator siphoned around 116,500 rsETH (worth approximately $292 million) from Kelp DAO’s LayerZero bridge. They then used these stolen tokens as security on Aave V3, allowing them to borrow about $236 million in WETH.
Since rsETH ultimately lost its backing, the assets used as collateral for loans cannot be sold to cover the debts. This leaves $280 million in borrowed funds stuck within Aave’s system, which Aave is unable to immediately recover.
As an analyst, I’m seeing a rapid impact on Aave users and those with deposits. The ETH pool is now at full capacity, meaning there’s virtually no ETH available for withdrawals. This essentially means anyone trying to quickly move their funds out of the pool is likely hitting withdrawal limits right now.
According to crypto portfolio manager Pratik Kala, people weren’t worried about losses directly caused by Aave, but rather about the platform being affected by problems originating elsewhere. This led to a rush of withdrawals as users panicked. Kala described it like a bank run, where people withdraw their money immediately and worry about the details later.
As an analyst, I’ve been closely watching Aave since news of the recent exploit surfaced on Saturday. We’ve seen roughly $9 billion leave the platform in net outflows. This has significantly impacted the total value locked – it’s down by over a third, now sitting around $17.5 billion.
The problems weren’t limited to Aave. According to DefiLlama, the total value locked (TVL) across all decentralized lending platforms dropped by about $13 billion in just two days.
Price 86% Below All-Time Highs
Following recent market turbulence, Aave’s token price dropped significantly. By Monday, AAVE was down around 26% from its recent peak of $118 last Friday, which occurred after a general rise in crypto prices the previous week.
As of today, AAVE is trading at around $88 per token. Looking at data from CoinGecko, it’s clear the asset is facing challenges – it’s currently about 86% below its highest recorded price of $661. As a researcher, I’m keeping a close eye on this significant drop.
Aave has taken steps to limit potential risks following recent events. They temporarily paused trading in rsETH markets on their platform. While Aave believes the rsETH currently traded on Ethereum is fully backed, they are maintaining these restrictions as a safety measure.
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2026-04-21 09:58