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Aave (AAVE) saw a sharp contraction in total value locked (TVL) over four days after a security incident linked to KelpDAO triggered concerns across decentralized finance. The episode, tied to a vulnerability in KelpDAO’s rsETH bridging infrastructure, resulted in fraudulent collateral tokens that enabled an attacker to borrow legitimate ETH from Aave liquidity pools before withdrawing the funds.
The exploit targeted a weakness in KelpDAO’s rsETH bridge. After creating fraudulent collateral tokens, the attacker used them to take out loans from Aave’s liquidity pools and then withdrew the borrowed ETH. The bad debt facing Aave is currently estimated at $196 million to $280 million.
Before the April 18 security incident, Aave held approximately $48.5 billion in aggregate deposits. By April 22, that figure had fallen to roughly $30.7 billion, a drop of more than one-third. Crypto intelligence account Wu Blockchain reported that total outflows exceeded $16.2 billion during the period.
Aave’s total deposits also fell below $30 billion. In parallel, the platform’s total supplied funds dropped from $45.8 billion to $29.6 billion.
Across the same four-day window, cumulative outflows from Aave reached $16.2 billion. The article also notes that Morpho experienced capital flight, with TVL declining from $11.7 billion to $10.2 billion during the identical timeframe.
The outflow from Aave did not fully leave the DeFi sector. SparkLend’s TVL increased to $3.2 billion, absorbing roughly $1.3 billion in fresh deposits over the same period. Blockchain analytics cited in the article indicate users repositioned funds toward platforms perceived as having lower risk exposure.
During the analysis period, the AAVE token traded around $93.45, reflecting a 1.06% gain over 24 hours. Despite that short-term uptick, AAVE was down 7.09% over the previous week and about 11% over the past month.
The article also describes whale accumulation alongside retail outflows following the KelpDAO exploit, citing figures including $26.3 billion → $15.6 billion for TVL and an estimated $196 million in bad debt (noting that the broader bad-debt range was also cited earlier).
Exchange-held reserves of AAVE tokens rose to nearly 2.39 million units, a pattern the article links to potential selling activity. It also states that active borrowing positions on Aave were stagnating, demand for new loans weakened, and incoming capital flows diminished. The combination of falling TVL and rising exchange inflows is presented as consistent with distribution behavior.
At the same time, the article notes that large-wallet addresses continued accumulating AAVE tokens. It also references broader market conditions, stating that Bitcoin remained above $78,000 and Ethereum above $2,300.
On the four-hour chart, the article reports the MACD histogram turning positive with signs of a potential bullish crossover. The RSI is described as hovering around 46, below the neutral 50 level.
The article outlines potential levels: a break above $96 would target $100, and a decisive move above $100 could open the way toward $108. It also notes that failure to hold $90 could expose $88, with $84 identified as the next significant support zone.
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