Aave recovers 90% of losses after Kelp DAO exploit thanks to liquidations

Aave, a major decentralized lending protocol (DeFi), has announced it recovered nearly 90% of the losses linked to the Kelp DAO exploit by liquidating the rsETH positions of the hacker on the Ethereum and Arbitrum networks. According to estimates from Galaxy Digital, the recovered amount stands at $207 million out of a total of $230 million in toxic debt generated by the attack that occurred in March 2026. This operation marks a significant step in the protocol's resilience, although 10% of the losses remain to be covered. The facts The Kelp DAO exploit, which occurred in March 2026, had led to the issuance of uncovered debt, causing a major crisis of confidence in the DeFi sector. Aave has since proceeded to liquidate the rsETH positions held by the hacker, specifically targeting assets on Ethereum and Arbitrum. Thaddeus Pinakiewicz, analyst at Galaxy Digital, confirmed that this operation recovered the majority of the lost funds, thereby reducing the financial impact of the incident. The AAVE token initially reacted negatively to the announcement of the exploit, falling by nearly 50%. However, signs of recovery have been observed following the first liquidations, reflecting an attempt to stabilize the market. Why it matters This partial recovery of funds illustrates Aave's ability to mitigate the consequences of a major exploit, while also highlighting the persistent risks related to liquidity and the reputation of DeFi protocols. Although the protocol has made progress in resolving the crisis, it remains vulnerable to new shocks, particularly due to the fragility of investor confidence in the sector. In the short term, the AAVE token could benefit from a technical rebound, but its fundamentals remain weakened by the incident. Market observers will closely monitor Aave's ability to absorb any new shocks, as well as the reactions of regulators, who could strengthen audits of DeFi protocols in a context of heightened vigilance. What to watch Additional liquidations : Aave could announce further forced sales if the attacker's remaining positions are not fully covered. Regulatory response : Authorities could step up scrutiny of DeFi protocols following this incident. Stability of the AAVE token : The protocol's ability to maintain or improve its market position will depend on how it manages residual risks. Investor confidence : Aave's resilience will be tested in the coming weeks, particularly in the face of possible new disruptions. This situation highlights the importance of security mechanisms and risk management in the DeFi ecosystem, where exploits can have major repercussions on the stability of protocols and associated assets.