Aave saw its total value locked plunge by nearly $8 billion over the weekend after fallout from the Kelp DAO exploit rippled across DeFi markets. TVL dropped from around $26.4 billion to $18.6 billion, highlighting how quickly liquidity can vanish when confidence is shaken. The incident underscores just how interconnected DeFi protocols have become.

The exploit began when attackers drained roughly $293 million in rsETH and used it as collateral on Aave to borrow assets. This created an estimated $195 million in bad debt, putting immediate pressure on the protocol’s liquidity pools. Stablecoin pools like USDT and USDC reached 100% utilization, meaning billions in funds became temporarily inaccessible to users.

As panic spread, large players began pulling funds, accelerating the liquidity crunch. The situation shows how a single exploit can cascade across multiple platforms, turning a localized hack into a broader DeFi stress event.