Aave's total value locked (TVL) plunged $8.45 billion in two days, falling from roughly $26.447 billion to $17.947 billion, according to on-chain data from Lookonchain. The crash was triggered by an exploit involving rsETH collateral that eroded user confidence across the protocol.
rsETH Exploit: $250M Drained, Bad Debt Emerges
Analyst Darkfost reported that the attacker used rsETH as collateral to extract approximately $250 million from Aave markets. Although core contracts remained intact, the collateral failure created systemic risk, leading to bad debt in lending pools. Panic withdrawals surged to nearly $7 billion within a single day as users rushed to reduce exposure.
AAVE Token Under Pressure, 355K Tokens Sent to Exchanges
AAVE's price dropped roughly 15% during the same period. On-chain data shows that over 355,000 AAVE tokens (worth about $32 million) moved to exchanges, with Binance handling the largest share. Daily inflows far exceeded the monthly average of 31,000 tokens, signaling strong selling pressure. Darkfost noted that more than 236,000 AAVE flowed into Binance alone.
DeFi TVL Sheds $13.2B Across Chains
The crisis rippled across the broader DeFi ecosystem. Total DeFi TVL fell from $99.497 billion to $86.286 billion, a combined loss of about $13.21 billion in two days. Protocol-level security concerns heightened market sensitivity, triggering synchronized declines across multiple chains.
Aave Freezes rsETH and WETH Markets
Aave confirmed it has frozen rsETH markets across V3 and V4 deployments. While rsETH on Ethereum mainnet remains fully backed, the freeze stays in place as a precaution. Additionally, WETH reserves are frozen on affected networks including Ethereum, Arbitrum, Base, Mantle, and Linea. Aave stated it is reviewing all available data and assessing potential solutions as new information emerges.