•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The aftershocks of Saturday’s KelpDAO hack are spreading through stablecoin markets in ways that were not immediately obvious. In the first 24 hours after the attack, users on Aave borrowed approximately $300 million against their tether (USDT) deposits on the platform, according to Chaos Labs data shared by monetsupply.eth.
The borrowing spike is not being framed as new demand. Instead, it reflects that depositors could not withdraw their stablecoins because liquidity in Aave’s stablecoin pools was effectively exhausted.
Aave is a decentralized finance (DeFi) protocol that allows users to lend and borrow cryptocurrencies without intermediaries. Users deposit assets into lending pools and earn interest, while borrowers post collateral that exceeds the loan amount. The system relies on a core assumption: there is enough liquidity in the pool for lenders to withdraw when they want.
That assumption broke after the KelpDAO exploit involving rsETH, a liquid re-staking ether token issued by KelpDAO. On April 18, an attacker manipulated KelpDAO’s bridge infrastructure into releasing 116,500 rsETH—about 18% of the token’s circulating supply—worth approximately $292 million. The fake, unbacked tokens were then deposited into lending protocols, mostly Aave, to borrow real assets.
Aave froze rsETH markets on V3 and V4 within hours. While the freeze stopped further bleeding, it also triggered a chain reaction that contributed to liquidity stress across Aave’s pools.
When the exploit news broke, whales and large funds withdrew billions of dollars from Aave’s liquidity pools within hours. Because withdrawals came early and at scale, liquidity was drained.
Analyst Duo Nine said that after the rsETH exploit and resulting bad debt, the ETH market hit 100% utilization, meaning users could not withdraw ETH from Aave. The problem then spread to USDT and USDC pools, with utilization rates also reaching 100% as more than $6 billion in assets left the protocol within hours.
In this situation, when all deposited assets have been borrowed out, there is nothing left for withdrawals—leaving depositors with limited options.
With stablecoin pools maxed out, depositors began taking loans against their own locked funds. Monetsupply.eth said the negative secondary effects of illiquidity in Aave stablecoin markets included a ~$300 million increase in borrowing with USDT collateral in just the past day since the rsETH exploit.
Monetsupply.eth also described the mechanism as depositors being unable to withdraw due to 100% utilization, leading them to borrow against their deposits at a loss to access liquidity.
Duo Nine explained that some users borrowed against USDT/USDC and exited via other markets at a 10%–25% loss. The approach was described as borrowing GHO/DAI/USDe against locked USDT/USDC, rather than a trading strategy.
Aave allows users to borrow up to 75% of the total loan-to-value (LTV) of their deposited collateral, depending on the asset and its risk parameters. As monetsupply.eth noted, this means users with stuck USDT deposits can take out up to three-quarters of the value of their Aave position—but doing so reduces liquidity in other markets, with USDC and USDe markets also reaching 100% utilization.
Monetsupply.eth summarized the broader lesson as a reminder that decentralized systems can still face structural liquidity and collateral risks when market assumptions fail.
Premium gym chains are entering a “golden era” that is ending or already in decline, as rising operating costs collide with shifting consumer preferences toward more flexible, community-based ways to exercise. Long-term memberships are shrinking, margins are pressured by higher rents and facility expenses, and competition from smaller, more personalized…
