AAVE holds falling-wedge support as OI jumps after Kelp DAO rsETH hack
AAVE is trading near $92.78, down about 1.25% in U.S. hours, but the market is watching a potential rebound setup. Technical analysis highlights that AAVE is holding support from a falling-wedge pattern, and momentum indicators (RSI around 46%) suggest a recovery attempt.
The key trading catalyst is leverage positioning in derivatives. AAVE open interest (OI) rose from ~$211M to ~$321M over two weeks (+52%), signaling futures traders are adding exposure despite recent turmoil. The article frames this as AAVE building leverage ahead of a possible breakout from the wedge.
Fundamental pressure remains elevated. After the largest DeFi hack of 2026, Kelp DAO’s liquid restaking protocol was breached on April 18, 2026, with an estimated loss of ~116,500 rsETH (about $292M). The attacker used a “1-of-1” LayerZero DVN approach to forge cross-chain messages and mint/release unbacked tokens, then used the unbacked rsETH as collateral on Aave to borrow an estimated ~$190M–$236M in liquid assets (including WETH). This triggered bad debt, pushed Aave pool utilization to 100%, and contributed to a liquidity crisis.
The broader on-chain impact included withdrawals exceeding $16.2B, reportedly cutting Aave deposits by over one-third to around $29.6B.
Price-wise, the piece estimates a potential ~20% rebound if the falling wedge holds, targeting resistance levels around $111, and further upside toward $131–$141 if a breakout occurs. For traders, the immediate signal is mixed: AAVE’s derivatives OI is strengthening, but DeFi liquidity stress still overhangs risk management.
Neutral
This news is mixed for trading. On one hand, AAVE shows a constructive technical structure: falling-wedge support with derivatives leverage building. The sharp OI jump (from ~$211M to ~$321M) often precedes volatility expansion and can drive upside if buyers can reclaim resistance ($111 then $131–$141).
On the other hand, the Kelp DAO incident is a real liquidity and credit-risk shock. The use of unbacked rsETH collateral on Aave led to bad debt and reportedly massive withdrawals (> $16.2B), which typically damages confidence across DeFi lending and can cap rallies. Historically, large DeFi hacks (e.g., past oracle/manipulation or bridge exploits) often cause short-term price bounces on technical levels while liquidity conditions remain fragile, leading to whipsaws.
Short-term, the market may trade “technical rebound vs. liquidity fear,” with OI suggesting traders are willing to take risk. Long-term, the extent of deposit/borrow recovery in Aave will likely determine whether the leverage build-up becomes sustainable or collapses again. Hence, the expected net effect is neutral: bullish for a tactical rebound attempt in AAVE, but bearish for broad market stability until liquidity stabilizes.