A $292 million hack tied to restaking protocol Kelp DAO has rippled through decentralized finance (DeFi) lending and market confidence far beyond the original incident, with Aave emerging as one of the hardest-hit examples.
Over the weekend, Aave’s native token (AAVE) fell by about 26%, while the protocol also saw a sharp decline in total value locked (TVL) and continued outflows that intensified the downturn.
Kelp DAO Hack Sparks Aave CrisisBecause the rsETH later became effectively unbacked, the collateral underpinning those positions is not liquidatable, leaving the borrowed funds stranded within the lending system. As a result, Aave is now facing a $280 million in bad debt that it cannot directly recover.
Since Saturday, when the heist news first emerged, Aave has recorded around $9 billion in net outflows. Total value locked on the platform fell by more than a third, dropping to about $17.5 billion.
The damage was not confined to Aave. DefiLlama data indicate that across all decentralized lending protocols, TVL fell by roughly $13 billion within 48 hours.
Price 86% Below All-Time HighsFeatured image from OpenArt, chart from TradingView.com
