Aave is the largest $ETH lending protocol, the volume of deposits on which, according to DefiLlama, exceeds 55 billion dollars.
Over the past week, decentralized financial whales have withdrawn Ethereum for a whopping $1.7 billion from the Aave credit protocol. As a result, available liquidity decreased, and the interest rate charged by the protocol to borrowers temporarily exceeded 10%. The victims were only those engaged in looping — a strategy of profiting from Ethereum staking by repeatedly making deposits and borrowing on the market — they suddenly began to lose money.
According to beaconcha, on today, the exit queue for staking exceeded 705,013 Ethereum worth about 2.5 billion dollars. This is the highest indicator in the entire history.
The withdrawal of Ethereum by whales from Aave led to a reduction in the supply of the asset on the platform. In such cases, the protocol is designed to increase the interest rate charged to borrowers. When the interest rate jumped, it meant that cyclical strategies that depended on maintaining a low interest rate on Ethereum borrowings backfired, and investors began to lose money. These investors closed their positions, lined up millions of dollars worth of Ethereum to withdraw from the staking network contract through liquid staking providers, and created a larger queue that led to a loss in the value of the asset.
However, AAVE remains one of the strongest projects on the market and it can be taken even from the current ones, since it still has at least 50% to ATH and even more.
