🔥Just one large withdrawal believed to be from Justin Sun withdrew $1.7 billion in ETH from Aave, causing borrowing rates to spike, leading to a 0.3% peg loss of stETH and shaking the entire DeFi system.

The stETH/ETH leverage strategies that were widely used collapsed en masse as borrowing costs increased and the stETH exchange rate began to slide. Investors panicked, withdrawing funds, with the unstake queue extending up to 18 days, forcing many to sell off in the secondary market, further driving down the price of stETH.

With a spread of only 0.3%, but on 10x leverage, losses can reach up to 3%, causing many positions to be forcibly closed or trapped.

This event exposed systemic risks in DeFi:

• Dependence on oracles that lag behind market prices.

• Slow staking withdrawal mechanisms, easily causing liquidity traps.

• The withdrawal of a single individual can collapse the entire leverage chain.

Amid the chaos, ETH rose 8%, sETH surged 30%, indicating that investors are seeking an escape from stETH. Once again, DeFi proves that rapid growth does not come with systemic resilience.