Layer-2 scaling protocol Arbitrum has submitted a governance proposal requesting the release of approximately $71 million in frozen Ethereum (ETH) to fund the Kelp recovery plan. The initiative aims to salvage rETH, a derivative token that was compromised by recent security vulnerabilities, as part of a broader effort to restore the Kelp DAO ecosystem.
Kelp Recovery and AAVE's Role
Kelp DAO, a liquid staking-based DeFi protocol, saw its rETH token locked due to a contract exploit, triggering cascading risks. Arbitrum's proposal seeks to reallocate the frozen ETH from its treasury to rebalance liquidity pools and restore user confidence. Meanwhile, lending protocol AAVE has already raised $160 million to address bad debts stemming from the Kelp incident, preventing contagion across DeFi markets.
AAVE's swift action underscores the importance of systemic risk management in decentralized finance. If the Arbitrum proposal passes, the funds will be exclusively used for Kelp's liquidity recovery.
Bitcoin ETF Inflows Surge, BTC Nears $80,000
As DeFi works to contain damage, institutional interest in Bitcoin continues to grow. Data shows that options open interest for BlackRock's spot Bitcoin ETF has reached $27.61 billion, a record high. Morgan Stanley's Bitcoin ETF has attracted $184 million in total net inflows with zero outflows, indicating strong long-term holding sentiment.
Overall, U.S. spot Bitcoin ETFs recorded $1.9 billion in net inflows last week, propelling Bitcoin's price toward $80,000. Analysts attribute the rally to sustained ETF demand, while successful resolution of DeFi crises could further stabilize the broader crypto market.