Aave's liquidity shrank sharply over the weekend as DeFi users pulled funds after the Kelp DAO rsETH incident spread into lending markets.

What changed

On April 18, Kelp DAO said it had detected suspicious cross-chain activity involving rsETH and paused rsETH contracts across mainnet and several layer 2 networks while it investigated. Aave then said it froze the rsETH markets on both V3 and V4, stressing that Aave's own contracts were not exploited and that the action was meant to stop new deposits and borrowing against the affected asset.

DefiLlama's protocol data shows Aave's total value locked fell from about $26.4 billion on April 18 to about $17.9 billion by April 20, a drop of roughly $8.45 billion in two days. Aggregate DeFi TVL also moved lower over the same window.

Why it matters

That does not prove every dollar left because of Kelp DAO. Prices, risk reductions, and broader positioning can all move TVL. But the timing shows how fast a bridge or collateral problem can spill across protocols once a widely used restaking asset is questioned.

The key verified point is that DeFi's damage did not stop at the original exploit notice. Kelp had to pause rsETH, Aave had to freeze the affected markets, and users reacted by pulling liquidity from one of the sector's largest lending venues. For Ethereum DeFi, the episode is another reminder that composability works in both directions: yield assets help capital move efficiently in calm markets, but they can also transmit stress quickly when backing or bridge assumptions break.