A sharp aave selloff in deposits has shaken DeFi after a security breach tied to KelpDAO’s rsETH bridge triggered a rapid flight of capital.
Summary
TVL falls as confidence weakens
The aave tvl drop accelerated after the April 18 incident, when total value locked fell by about $15 billion in four days. Before the breach, Aave held roughly $48.5 billion in deposits.
By April 22, that figure had dropped to about $30.7 billion. Moreover, Wu Blockchain on X reported more than $16.2 billion in outflows, which erased over one-third of the deposit base. Morpho also lost ground, with TVL sliding from $11.7 billion to $10.2 billion.
The breach targeted a weakness in KelpDAO’s rsETH bridging infrastructure. A malicious actor allegedly minted fraudulent collateral tokens, borrowed legitimate ETH from Aave’s liquidity pools, and then withdrew the funds. The bad debt for Aave is now estimated at between $196 million and $280 million.
Capital moves to perceived safer venues
That said, users did not leave DeFi altogether. SparkLend absorbed much of the displaced capital, and its TVL climbed to around $3.2 billion.
On-chain data points to about $1.3 billion in fresh deposits for SparkLend over the same period. The move suggests a defi liquidity shift toward platforms seen as carrying lower perceived risk. SparkLend capital inflow became one of the clearest signs of that rotation.
However, the pattern also fits the broader defi security incident narrative. When trust breaks, liquidity often migrates quickly, even if it stays inside the same sector.
Price action remains under pressure
During the period reviewed, aave price analysis showed the token trading around $93.45. It posted a modest 24-hour gain of about 1.06%, but it remained down roughly 7.09% over the previous week and about 11% over the past month.
Technical readings were mixed. The MACD histogram turned positive and hinted at a possible bullish crossover. Meanwhile, the RSI sat around 46, just below the neutral 50 line. Moreover, resistance now sits in the $100-$105 area, while support remains near $85-$90.
If AAVE clears $96, the next target could be $100. However, a break below $90 could expose $88 and then $84. The current setup shows how quickly sentiment can shift when liquidity and trust weaken at the same time.
Exchange flows point to distribution
aave exchange reserves rose to nearly 2.39 million tokens, a move that traders often read as a prelude to selling. At the same time, active borrowing positions on Aave stayed stagnant, new loan demand softened, and incoming capital slowed.
The article frames the gap between falling TVL and rising exchange inflows as distribution rather than accumulation. That reading is reinforced by the broader market response after the kelpdao bridge exploit.
In short, the shock hit deposits, liquidity, and market sentiment at once. Aave remains under pressure, and the next price move will likely depend on whether buyers can defend the $90 area.
