Aave traded near $111 on Wednesday as the market digested a liquidation event triggered by an oracle configuration error. The token changed hands at $111.45, down about 2.2% over the past day. Over the past week, prices fluctuated between $105.31 and $118.70, with recovery attempts failing below pre-downtrend levels.
Derivatives Activity Cools as Traders Cut Exposure
Spot and derivatives market participation both declined. Daily trading volume fell to approximately $29 million, an 11% decrease from the previous day. CoinGlass data shows futures volume dropped 14% to roughly $300 million, while open interest declined nearly 5% to around $190 million. Simultaneous declines in volume and open interest suggest traders reduced positions and stepped back after the liquidation incident.
CAPO Oracle Misconfiguration Triggered the Liquidations
The cause was not a security breach or a market crash, but a configuration error in CAPO, Aave’s internal oracle for monitoring collateral prices. The error affected positions using Lido's wstETH as collateral. A mismatch between an exchange rate snapshot and its timestamp caused the system to misread the wstETH/ETH price, undervaluing the asset by approximately 2.85%. Healthy positions were flagged as undercollateralized, triggering automated liquidations. Around 34 accounts saw their positions liquidated, with 10,938 wstETH (worth roughly $27 million) moved through the process.
Protocol Solvent; Compensation Plan in Motion
Liquidation bots collected nearly 499 ETH in fees and bonuses. Crucially, the Aave protocol remained solvent and accrued no bad debt. Chaos Labs and the Aave team corrected the oracle configuration shortly after the issue surfaced. The Aave DAO and Lido have indicated support for compensating affected users through recovered funds and treasury resources.
Technical Outlook: Descending Channel Intact, $110 Key Support
Aave price remains inside a daily descending channel characterized by lower highs and lower lows. Short-term moving averages cap recovery near the $125–$130 resistance zone. Support sits between $110 and $115, where buyers stepped in recently. A breakdown below $110 could open further downside risks.