Aave Wasn’t Hacked. The Collateral Around It Was
Aave’s official comment was pretty clear.
The issue was not in Aave’s core contracts.
The risk came from rsETH and the external incident tied to it.
What they did right away:
📍 froze the rsETH and wrsETH markets
📍 stopped new deposits and new borrowing against those assets
📍 left existing positions untouched just because of the freeze itself
This is where the crowd usually gets it wrong.
They see the Aave name in the headline and stop there.
No distinction between the protocol, the collateral, the external risk, and the liquidity damage spreading through the system.
But the mechanics here are different.
This is not an Aave exploit story.
This is a toxic collateral story.
An asset gets accepted into DeFi, risk builds under the surface, then the protocol starts isolating it fast once the damage becomes obvious.
When a protocol cuts off new activity around an asset, the market is no longer in normal trading mode.
Now it is repricing collateral quality, liquidity, and linked positions.
That is where people usually make the bad trade.
Either panic selling without understanding the structure, or trying to catch a bounce while the system is still working out the damage.
In this kind of setup, I would watch three things:
📍 where forced deleveraging starts
📍 which related assets lose liquidity next
📍 who else was treating this structure as normal collateral