AAVE Prices Plummet 20.3% Amid KelpDAO rsETH Vulnerability

The cryptocurrency market experienced significant volatility over the past 24 hours, with AAVE prices plummeting from $116.08 to $96.51. The rapid decline was triggered by a vulnerability in KelpDAO's liquid restaking token rsETH, which led to bad debt risks on Aave V3.

According to reports, the attacker exploited rsETH as collateral and borrowed a substantial amount of ETH, resulting in massive bad debt risks when rsETH's value collapsed. This incident caused AAVE prices to drop more than 10% within 15 minutes.

Before the vulnerability was revealed, AAVE had experienced a brief surge due to the V4 upgrade and a $350M protocol fund injection, with prices increasing by 7%. However, panic selling dominated after the news broke, leading to the sharp decline.

The market sentiment has shifted to panic, with bears dominating the short-term outlook. Analysts are warning of further downside, with some suggesting that AAVE may reach the $88 support level if bad debts are not managed well. Nevertheless, others believe that V4 still holds long-term potential if risk aversion is exercised.