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Guavy AI Editorial Team••Sentiment: -4•Clout: 85

Aave Freezes WETH Withdrawals Amid KelpDAO Exploit

DAOETHAAVE

A major exploit of the KelpDAO liquid restaking protocol has sent shockwaves through DeFi markets, causing a liquidity crunch for Aave.

The attack, which drained $292 million from KelpDAO, led to massive bad debt for Aave, with an estimated $177 million to $290 million worth of unliquidatable borrowing positions.

Aave's governance has intervened to freeze WETH reserves and isolate the risk, but the move has sparked fears of a broader liquidity crunch in DeFi markets.