AAVE Deposits Drop to $29.6B After KelpDAO Exploit, $16.2B Outflows

AAVE deposits fell to $29.6B from $45.8B after the KelpDAO rsETH exploit. Cumulative withdrawals reached $16.2B, highlighting rising composability risk across DeFi when restaking/lido-style liquidity is disrupted. On the Ethereum prediction market (Polymarket), the contract “ETH to $10,000 by Dec 31, 2026” is trading around 4% (“YES”), unchanged for the past week. The term structure is flat at 4% across all resolution dates, with 252 days until resolution. For the daily USDC volume on the Ethereum contract, the article cites $434 versus a face value of $13,388. Moving the outcome by 5 percentage points reportedly costs $1,057, implying relatively small trades can shift odds. Why it matters for traders: the $16.2B outflow suggests Aave liquidity can drain quickly without a direct “protocol-level” failure. AAVE deposits dropping roughly 35% in a single episode increases attention on restaking protocol risk and downstream effects on DeFi collateral assumptions. With odds flat at 4% across horizons, markets do not currently price a near-term catalyst for Aave’s liquidity recovery. What to watch next: any similar withdrawals from other restaking or liquid staking protocols, security/liquidity responses from DeFi teams, and Ethereum network upgrades or Foundation updates that could change sentiment. A rebound in AAVE deposits above $35B would be the clearest sign stabilization has started. The market also implies a high-upside trade—4¢ for a $1 payout if ETH reaches $10,000—requiring both Aave liquidity recovery and a large ETH move within the prediction window.