Today in crypto, value locked on Aave dropped by $8 billion after the Kelp hack, the contagion of which crypto executives have argued could have been contained at the cost of capital efficiency and RaveDAO denies involvement in the RAVE token price surge and crash.
Aave's TVL drops by $8 billion after Kelp hack
The total value locked on Aave dropped by nearly $8 billion over the weekend after hackers behind the $293 million Kelp DAO exploit borrowed funds on the decentralized lending protocol, leaving roughly $195 million in “bad debt” and triggering withdrawals.
Aave’s TVL fell from about $26.4 billion to $18.6 billion by Sunday, losing it the top spot as the largest decentralized finance protocol as the risk from the Kelp exploit rapidly spreads through the interconnected crypto lending market.
Hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth about $293 million from Kelp DAO’s LayerZero-powered bridge on Saturday and used them as collateral on Aave to borrow wrapped Ether (wETH).
Crypto analytics platform Lookonchain said that it created about $195 million in “bad debt” on Aave and contributed to a rapid decline in the Aave (AAVE) token.
Kelp exploit highlights problem with non-isolated DeFi lending: Crypto execs
The exploit of the Kelp liquid restaking protocol shows how non-isolated lending and integrations in decentralized finance (DeFi) can cause broader ecosystem contagion, according to crypto industry executives and blockchain security firms.
Non-isolated lending on DeFi platforms, including earlier versions of the Aave lending protocol, exposes users to risks from all the various tokens used as collateral on the platforms, according to Michael Egorov, founder of the Curve Finance DeFi protocol.
Kelp was the target of a cyber attack on Saturday, causing the platform to pause smart contracts for its restaking token (rsETH) while it moved to investigate the attack that left the platform drained of about $293 million.
DeFi teams should also vet prospective digital assets to ensure that tokens do not feature single points of failure or attack surfaces before approving tokens as lending collateral on their platforms, Egorov said in an email.
RaveDAO denies manipulation as Binance, Bitget probe RAVE trading activity
RaveDAO has denied any role in the recent surge and sharp collapse of its RAVE token, as major crypto exchanges open probes into trading activity following allegations of market manipulation.
In a thread posted on X, the project said it was “not engaged in, nor responsible for, recent price action,” responding to mounting scrutiny after RAVE soared from roughly $0.25 to nearly $28 within days before plunging more than 80%.
The denial comes as onchain investigator ZachXBT accused the project of orchestrating a pump-and-dump scheme, pointing to concentrated token holdings and suspicious exchange flows. He claimed that more than 90% of the token supply may be controlled by insiders, calling on exchanges to take action.
Both Binance and Bitget confirmed they are reviewing the situation. “We’re looking into it,” Binance CEO Richard Teng wrote, while Bitget CEO Gracy Chen said the exchange had “started investigating” RAVE trading activity.
