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Aave’s Total Value Locked (TVL) has fallen to $17 billion after an exploit involving KelpDAO’s cross-chain bridge triggered more than $8.45 billion in withdrawals and created unliquidatable bad debt. The incident also coincides with ongoing prediction-market pricing for Ethereum, where a $10,000 target by 2026 remains at 4% YES on Polymarket.
Attackers stole approximately 116,500 rsETH (about $292 million) and used it as collateral on Aave V3 on Ethereum to borrow WETH. Bad debt was created when rsETH lost its backing. In response, Aave froze related markets and is coordinating with KelpDAO.
The liquidity crisis led to $5.4–8.45 billion in withdrawals, mostly in ETH/WETH, raising systemic risk concerns on Ethereum. Aave’s TVL has declined to $17 billion following the exploit.
Despite the headline shock, odds for Ethereum reaching $10,000 by December 2026 have not moved, holding at 4% YES. The market is described as thin: $105 in USDC trades daily, and $1,323 would move the odds by 5 percentage points. Traders have not recalibrated long-term expectations based on the exploit.
The exploit highlighted weaknesses in cross-chain bridge security. The combination of Aave’s liquidity drain and downstream effects on Ethereum could weaken confidence and make a $10,000 ETH outcome harder to achieve. At 4¢ per YES share, a successful $10,000 target would pay 25x, but that payoff would come with substantial risk of further systemic problems.
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