CryptoQuant said the April 18, 2026 KelpDAO exploit let an attacker siphon unbacked rsETH, move it into Aave, and swap that collateral for WETH and stablecoins. The firm said the sequence set off a severe liquidity contraction across Aave and spilled into the wider DeFi market.
Aave became the main point of exposure
According to the report, Aave’s aETHrsETH contract holds about 83% of the total circulating rsETH supply, making it the protocol with the largest direct exposure to the incident. CryptoQuant estimated that Aave now faces roughly $124 million to $230 million in potential bad debt tied to depegged rsETH collateral. In the 72 hours after the exploit, Aave’s total value locked fell 33%, one of the steepest protocol-level liquidity contractions seen in DeFi in recent years, the report said.
Borrowing costs jumped across Aave’s biggest markets
The pressure showed up quickly in lending rates. CryptoQuant data showed that USDT and USDC borrow rates on Aave V3 rose from a pre-hack level of 3.4% to 14% as users rushed to borrow stablecoins and pull capital from the protocol. ETH borrowing rates climbed to 8%, the highest level recorded by CryptoQuant since at least January 2024. They later eased to around 5%, still far above the pre-exploit rate of about 2%.
The report said the simultaneous rise in ETH, USDC, and USDT borrowing costs pointed to system-wide strain rather than an isolated move in one market. Those three assets are Aave’s largest markets by total value locked. CryptoQuant described the pattern as a classic DeFi liquidity crunch: depositors were pulling funds out while borrowers were increasing demand at the same time, draining available liquidity and pushing interest rates sharply higher.
USDe supply shrank by $800 million in three days
Stress also spread to USDe, the fourth-largest asset on Aave with about $412 million in protocol deposits. CryptoQuant tracked a sharp drop in USDe minting activity in the days after the exploit. The report linked that decline to contagion from the Aave crisis and to persistently negative perpetual futures funding rates in ETH and BTC, which compressed USDe’s delta-neutral yield and increased redemption incentives.
USDe supply fell from $5.8 billion to $5 billion in three days, a drop of $800 million or about 14%. CryptoQuant said it was one of the largest short-term redemption events in USDe’s history. The firm added that the contraction in one of the largest stablecoins after USDT, USDC, USDS, and DAI showed that liquidity was being pulled from the broader DeFi market, with Aave’s concentrated rsETH collateral exposure magnifying the damage from the original exploit.