Aave price drops to $90 after Kelp DAO exploit, derivatives hint at potential recovery

Aave’s price dropped nearly 20% to around $90 on Monday morning following the massive Kelp DAO hack that left the protocol saddled with about $196 million in bad debt.

According to data from crypto.news, the price of Aave (AAVE) fell from $106 on Sunday to an intraday low of $89 on Monday before reversing some of its losses and settling at $91 at the time of writing.

Aave’s price fell following a decrease in the total amount of Aave locked up, which fell by around 8 billion over the weekend. As previously reported by crypto.news, the decline came after attackers linked to the $293 million Kelp DAO exploited funds from Aave, leaving about $195 million in “bad debt” on the deal and causing a wave of withdrawals.

Statistics from DeFiLlama show that Aave’s TVL dropped from about $26.4 billion to $17.5 billion on Monday, undermining its position as the largest DeFi protocol.

Crypto analytics platform Lookonchain noted that the decline came as some major crypto whales pulled funds from Aave during the turmoil. Notably, the crypto exchange MEXC and Abraxas Capital withdrew $431 million and $392 million, respectively, while another empty whale withdrew $405.7 million.

Although the Aave team confirmed that it froze the rsETH markets in its V3 and V4 implementations, this incident raised concerns about the security of the protocol and prompted retail investors to quickly exit their positions.

Despite the selloff, the position of derivatives suggests that sentiment may not be entirely strong.

According to data from CoinGlass, open interest in Aave futures markets rose 17% to $316.5 million in the past 24 hours. At the same time, its level of weight support has dropped into the red zone.

If the increase in OI is accompanied by a negative currency rate, such situations usually precede a short squeeze, where aggressive sellers are forced to cover their positions, which leads to acceptance of the price of the asset involved.

Another factor that suggests a bullish view of Aave’s price is the potential for Aave’s exit from trading. Despite the recent turmoil, investors have pulled more than $4 million from the exchange, which may have pushed them into defensive mode as they hope for a long-term recovery.

On the daily chart, the MACD indicator remains positive with green histograms, suggesting that the broad bullish momentum remains intact despite recent fluctuations. At the same time, Aroon Up is at 78.57%, much higher than Aroon Down by 7.14%, which means that the strong uptrend is still technically there.

For now, $100 serves as an immediate resistance level to watch, as a decisive break above the psychological threshold could restore market confidence and trigger a rally towards the previous monthly high.

Conversely, failure to hold $90 as support could lead to more panic selling and lower the price to test the next major support area at $75.