The Aave (AAVE) token dropped by more than 20% on April 19 after the KelpDAO rsETH exploit, leading to a sell-off from whales and a record rise in ETH exploitation through the lending protocol.
The token fell from around $115 to less than $92 within hours as major holders rushed to exit their positions. The Aave Ethereum pool reached 100% exploitation, effectively blocking withdrawals for remaining depositors.
Whale dumping millions of AAVE
The price of AAVE at the time of writing this report is $91.89, down 20.44% over the last 24 hours. With this decline, the token has retested levels last seen on April 13.
On-chain data tracked by LookonChain shows that three major wallets sold AAVE within hours of the exploitation announcement.
A wallet named smaugvision sold 20,015 AAVE for 2.06 million USDC at an average price of $103 each.
A second whale dumped 20,000 AAVE from address 0xFC56 for 2.05 million USDC at the same average.
A third wallet under address 0xA2E4 sold 19,666 AAVE for 1.95 million dollars and converted the proceeds into 505.65 ETH and 10.11 WBTC at a lower average of $99.
The total amount sold by the three wallets is approximately 60,000 AAVE worth over 6 million dollars.
5.4 billion dollars has exited Ethereum
Due to selling pressure in AAVE, suppliers have started withdrawing Ethereum (eth) from the Aave platform extensively. More than 5.4 billion dollars worth of eth has exited the protocol in just a few hours according to reports.
Tron founder Justin Sun withdrew 65,584 ETH worth approximately 154 million dollars, adding to the liquidity drain.
The mass withdrawal pushed the Ethereum usage rate in Aave to 100%, meaning the pool no longer has any liquidity left for new withdrawals.
Borrowing rates are expected to spike sharply as the protocol's interest rate curve punishes the high level of usage.
The main question for depositors trapped in the pool is whether Aave will be able to regain user trust through the support and freeze umbrella in the rsETH market.
Aave confirms that the impact is limited to the V3 market for Ethereum.
The Aave team told BeInCrypto that the situation is confined to the V3 market for ETH only, while V4 has not been affected at all.
The Aave team stated in an exclusive email sent to BeInCrypto that the situation is confined to the V3 market for ETH only and V4 has not been affected at all.
The team mentioned that they acted quickly by taking precautionary measures, freezing the rsETH reserve, withdrawing their borrowing ability, and temporarily reducing the loan-to-value ratio on ETH to 0%.
The reserves of stablecoins and all other assets are functioning normally without any exposure to this event.