Aave Suffers $8.88 Billion Liquidity Crisis Following KelpDAO Hack

Aave, a leading DeFi lending protocol, is facing a major liquidity crisis after being exploited by the KelpDAO hack. The attack allowed for fake collateral to be used to borrow over $200 million in real ETH, causing panic withdrawals and draining ETH markets.

The platform's TVL has plummeted from $26.4 billion to $17.52 billion, a drop of $8.88 billion in just two days. This has led to high utilization rates, with some users unable to withdraw their funds due to the frozen markets.

Aave has responded by freezing rsETH across its V3 and V4 protocols, capping exposure, and halting WETH reserves on various platforms. The team is working to resolve the issue, but time is of the essence as billions remain locked and user trust is at stake.