4 hours ago
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- Aave’s drop was driven by a collateral exploit that triggered forced liquidations
- Price is testing key support near $88–$92 with weak buyer control
- Rising open interest without price recovery suggests continued uncertainty and downside risk
Aave didn’t just dip… it got pushed. Hard. What started as a DeFi exploit quickly turned into something bigger—a chain reaction that dragged price down into a weak demand zone. And now? The dust hasn’t really settled yet.
There’s this uneasy feeling in the market. Support is being tested, positions are being rebuilt, but confidence… not quite there. So the question hangs—has AAVE found a floor, or is this just a pause before another leg down?
Exploit Exposes Weak Link in Collateral System
The root of the issue wasn’t a direct hack on Aave itself, which is important. Instead, it came from rsETH collateral tied to KelpDAO. That’s where things got messy. Traders used rsETH inside Aave to borrow large amounts of ETH, and when those positions started to wobble, the whole setup unraveled.
It wasn’t a bug—it was structural risk spilling over. And once that kind of weakness shows up, markets tend to react fast… sometimes too fast.
Aave moved quickly, to be fair. They froze rsETH markets across V3 and related deployments, basically cutting off the problem before it could spread further. But by then, users were already pulling liquidity, utilization spiked, and things started to cascade.
Liquidations Take Over and Drive the Drop
This is where it really accelerated. As liquidity tightened and price slipped, leveraged positions began to get liquidated. And once that starts, it rarely stops neatly.
Each forced liquidation added more selling pressure, which triggered more liquidations… and so on. A feedback loop, basically. The result? A sharp, aggressive drop that didn’t look natural at all.
It wasn’t slow selling. It was forced unwinding. That’s why the move felt so abrupt.
AAVE Hits Key Support, But Control Is Unclear
Now AAVE is sitting around a critical zone—roughly between $88 and $92. This level has seen reactions before, so it matters. But so far, buyers haven’t shown strong control. Price couldn’t reclaim the $95 to $100 range, and that’s a bit concerning.
If $88 breaks cleanly, there’s not much stopping a move toward $85… maybe even $80 if pressure keeps building. On the flip side, a recovery would need more than just a bounce. It would need a reclaim of $95, then a hold above $100. That’s the real test.
Right now, it’s kind of stuck in between.
New Positions Build, But Direction Stays Foggy
Another layer to this—open interest is starting to climb again. That means traders are coming back in, opening new positions. But price hasn’t recovered much alongside it, which is… not ideal.
When OI rises while price stays weak, it often signals uncertainty. People are positioning, but not with clear conviction. And in many cases, that leans bearish—markets tend to drift lower when fresh positions build into weakness.
At the same time, it increases the chance of sudden volatility. If those positions get squeezed, things could move fast again, in either direction.
Market Enters a More Uncertain Phase
The initial shock is over. The exploit is known, the liquidations have played out… but what comes next is less clear. Now it’s about how the market reacts at these levels, and whether buyers are willing to step in with enough strength to stabilize things.
For now, pressure hasn’t fully eased. And until it does, AAVE remains in a fragile spot—one where either outcome still feels possible.
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