Jack Paul 
Aave is struggling to revive its lending markets after the KelpDAO exploit shook confidence in the protocol. The DeFi platform launched a campaign to rebuild rsETH collateral, but other vaults remain inactive. New loans have nearly halted, with only an outlier of $32 million borrowed as of April 28. Activity dropped to minimal levels as both Aave and the broader DeFi ecosystem try to regain trust.
TVL drops sharply
Total value locked on Aave slid to around $14 billion, down from over $25 billion before the hack. Fees stayed at a baseline of $2.8 million daily. On the busiest days after the exploit, Aave saw outflows exceeding $15 billion. Lending rates remain elevated, with up to 6.38% for USDC borrowing. During the freeze of rsETH, the protocol offered over 13% but could not overcome investor fears. USDC vaults hit 100% utilization, discouraging lenders from risking funds.
As a result, Aave now offers better rates than the DeFi baseline, but hesitation persists. Based on the latest Aave V3 data, stablecoins and WETH saw the sharpest decline in lending. Borrowing still occurred for liquid assets like USDT, USDC, and WETH, but loan events slowed to nearly zero, according to CryptoQuant. Dune Analytics data shows WETH remains the most borrowed asset at $6.5 billion, followed by USDT at $3.7 billion and USDC at $2.9 billion.
Elevated rates signal stress
The recent higher lending rates suggest Aave faced a liquidity stress event rather than increased demand. Borrow rates spiked to over 14% APY before correcting to 7.12%. Lenders have become more defensive, making capital more expensive for DeFi. This marks one of the most significant borrowing collapses in DeFi history. Aave survived, but the event raised questions about DeFi resilience, though it was less severe than the crashes of FTX and Terra that triggered a two-year slump.
Some whales moved their funds immediately, shifting to Spark Protocol as a safer option. Aave founder Stani Kulechov expressed confidence despite the crunch. He remarked that Aave survived multiple bear cycles and could attract liquidity again. In a recent X post, he called the rsETH bridge incident unfortunate, noting the team’s efforts to secure the protocol. He added that seeing markets affected by an external exploit was hard to watch, even with full backing.
Community support and token pressure
In recent days, crypto influencers voiced support for Aave and showed readiness to return. The protocol is also voting on freezing buybacks until conditions improve, with a likely ‘yes’ vote in two days. The slower lending still weighs on the AAVE token, which slid to $93.21 in the past week.