Kelp DAO Hacked Triggers Chain Reaction, Aave Faces $280 Million Bad Debt and $9 Billion Capital Outflow

BroadChain BroadChain learned that at 18:30 on April 21, according to NewsBTC, the $292 million hacking incident related to the restaking protocol Kelp DAO has far-reaching impacts beyond the event itself, affecting the DeFi lending sector and market confidence, with Aave becoming one of the most severely impacted cases. Last weekend, the price of Aave's native token AAVE dropped by approximately 26%, and the protocol's Total Value Locked (TVL) also sharply declined, with continuous capital outflows exacerbating the downturn. The incident began when the attacker drained about 116,500 rsETH (worth approximately $292 million) from Kelp DAO's LayerZero bridge. Subsequently, the attacker deposited these stolen staked tokens as collateral into Aave V3, borrowing about $236 million in WETH. As rsETH essentially lost its value support thereafter, the related collateral positions could not be liquidated, resulting in the borrowed funds remaining trapped within the lending system. Consequently, Aave faces up to $280 million in bad debt that cannot be directly recovered. The impact quickly spread to users and depositors, with Aave's ETH pool utilization reaching 100%, meaning the protocol has almost no available ETH for users to withdraw. Since the theft news broke last Saturday, Aave has recorded approximately $9 billion in net outflows, and the platform's TVL has shrunk by over one-third to about $17.5 billion. DeFiLlama data shows that the TVL of all decentralized lending protocols collectively decreased by about $13 billion within 48 hours. As of press time, AAVE is trading at around $88, down about 26% from the monthly high of $118 reached last Friday. According to CoinGecko data, its price has fallen by approximately 86% from its all-time high of $661. Aave has taken action to freeze the rsETH market on its platform to control risks and stated that its analysis indicates that rsETH traded on Ethereum is still fully supported, but as a precautionary measure, the restrictions remain in effect.