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Aave’s AAVE token fell sharply on April 19, dropping more than 20% after a KelpDAO exploit triggered panic selling among large holders and pushed the protocol’s ETH liquidity to its limit.
AAVE fell from around $115 to under $92 as whales exited. The selloff was severe enough to drive Aave’s ETH pool to 100% utilization, meaning withdrawals were no longer possible and liquidity effectively disappeared.
At the time of reporting, AAVE traded at $91.89, down 20.44% on the day and the lowest level since April 13.
Lookonchain tracked three major wallets that sold AAVE soon after the exploit news broke:
Together, these wallets dumped nearly 60,000 AAVE tokens worth over $6 million, based on publicly tracked activity.
The AAVE selloff coincided with a large wave of ETH withdrawals. Reports cited more than $5.4 billion in ETH leaving Aave within hours.
Justin Sun withdrew 65,584 ETH, roughly $154 million, according to the report. The withdrawals pushed Aave’s ETH utilization rate to 100%, leaving no available liquidity for users attempting to withdraw ETH from the protocol’s V3 pool.
When utilization reaches 100%, borrowing rates rise quickly. Aave’s interest-rate mechanism is designed to make borrowing more expensive at high utilization to encourage repayment and free liquidity, but the simultaneous withdrawal pressure limited that effect. Depositors were unable to access assets, and the rate spike contributed to user panic.
Aave told BeInCrypto that the impact was contained to the V3 ETH market and that V4 was not affected.
The team implemented emergency measures, including:
According to the team, stablecoin reserves and other assets continued operating normally, with no exposure to the exploit on those fronts.
The KelpDAO exploit highlighted vulnerabilities in interconnected DeFi systems, where assumptions about other protocols’ behavior can fail and trigger rapid ripple effects. The incident also underscored the importance of security controls and robust protections as DeFi infrastructure continues to expand.
Aave’s actions—freezing reserves and adjusting lending parameters—aim to stabilize the protocol and restore confidence. However, the broader outcome depends on whether normal liquidity and borrowing conditions return and how quickly users regain trust.
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