Aave is dealing with the consequences of the DeFi exploit, but the real damage came afterward. This event triggered a series of liquidations that wiped out leveraged positions and pushed the price into a weak demand zone. Now, with support under pressure and traders reloading their positions, the market looks far from settled. Is this where AAVE price Finds a floor – or is another move down already in motion?
Exploitation led to decline — Aave moves to contain risk
The motivation came from an exploit linked to rsETH collateral (linked to KelpDAO), which exposed a structural weakness rather than a direct flaw in Aave itself. Attackers used rsETH within Aave’s lending markets to borrow large amounts of ETH, and when those positions became unstable, it left the protocol exposed to bad debts. This was not a smart contract hack on Aave, but rather a case of collateral risk extending to the lending layer.
Aave responded quickly to contain the damage. The protocol has frozen rsETH markets via Aave V3 (and related deployments, including upcoming V4 considerations) to prevent further borrowing and limit risk spread. At the same time, liquidity pressures intensified as users rushed to withdraw funds, driving utilization rates and causing forced liquidations. This combination – exploit pressure + defensive protocol action + user driven exits – is what ultimately accelerated the downward movement in AAVE.
Liquidations accelerated the downtrend
This loophole not only led to the sale, but forced it. As liquidity tightened and prices began to fall, leveraged positions were pushed into liquidation. This created a cascading effect, where each forced exit added more downside pressure.
This type of move is usually fast and violent, and that’s exactly what happened. The sell-off was not gradual, but was driven by forced unwindings rather than organic selling, which explains the sharp collapse in price and speed of movement.
AAVE at a critical level – collapse or bounce forward?
AAVE is now testing a key demand zone near the $88-92 range, a level that has already seen multiple reactions. The price also failed to reclaim the $95-100 range, suggesting that buyers are not in control yet. From here, the next step depends on how the price reacts at this level. A clear break below $88 could open the door towards the $85 area, with a deeper move towards $80 if selling pressure continues.
On the other hand, any recovery would first need a strong retracement of $95, followed by acceptance above $100.
With the initial landing completed, the focus now turned to positioning. Open interest (OI), which had fallen during the liquidation phase, began to rise again, but the price did not show a strong recovery. This is important. When OI builds while the price remains weak, it often signals entry into new positions without clear directional control.
In many cases, this tends to the downside, as markets tend to continue falling when new positions lead to weakness. At the same time, it also increases the risk of sudden fluctuations if those positions are squeezed.
What happens next to rising AAVE prices?
The initial trigger is known. The liquidation phase has ended. Now, AAVE price is entering a more uncertain phase where positioning and reaction at key levels will determine the trend. Whether this turns into a plateau or another decline will depend on how the market responds here, but for now, the pressure has not completely eased.
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