- Aave has seen a double-digit decline in TVL since Curve’s hack on 30 July.
- Low demand for its AAVE token since then has also pushed down the alt’s value
Leading Layer 1 network Ethereum [ETH] has not been immune to the cascading effects of Curve Finance’s exploit on 30 July. Data from on-chain analytics platform IntoTheBlock revealed an 8% decline in the total value of assets locked (TVL) across decentralized finance (DeFi) protocols housed within the chain.
Total Value Locked (TVL) in #Ethereum DeFi has fallen by almost 8% since Sunday. The decline, likely triggered by the uncertainty following the #Curve attack, represents a sharp decrease. To put this in context, the decrease amounts to $3.55B, with Curve's TVL on ETH comprising… pic.twitter.com/lZXWwvBfWQ
— IntoTheBlock (@intotheblock) August 1, 2023
Apart from Curve Finance [CRV], Aave [AAVE] was the only other protocol in the top 10 list of DeFi protocols on Ethereum that suffered a TVL drop since the hack. According to data from DefiLlama, the lending protocol’s TVL has fallen by 13% in the last three days.
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The TVL drop can be attributed to an increase in liquidity exit in the past few days due to Aave’s exposure to the Curve hack. Prior to the hack, Curve’s founder Michael Egorov had used some of his CRV tokens (representing over 45% of the token’s circulating supply) as collateral to borrow from various lending protocols, with the largest loan taken from Aave.
Mich confirming hacker got the large CRV pool.
That's probably enough CRV to push Mich's $100M+ of CRV into liquidation on Aave, Inverse and Abracadabra if its not absorbed.
This is going to be nasty for those protocols and for Curve.
Can rebuild but possibly brace for impact https://t.co/5LHPE8jXxt
— Adam Cochran (adamscochran.eth) (@adamscochran) July 30, 2023
With Egorov’s collaterals at risk of liquidation as CRV’s value dropped in the past few days, liquidity providers have begun to exit Aave to hedge against any domino effect of this event.
For example, on its recently deployed Aave V3 iteration on the Ethereum network, the value of deposits has declined in the past few days. As of 22 July, the market size was $2.24 billion. As of this writing, it was less than $10 million in previously-provided liquidity.
AAVE buyers stay their hands
An assessment of AAVE’s price movement on a daily chart revealed a decline in the token’s accumulation since the hack. Buying pressure immediately declined following the hack, and AAVE sellers regained control.
Per readings from the altcoin’s Directional Movement Index (DMI), AAVE sellers displaced its buyers during intraday trading hours on 30 July and have since been in control.
This indicator measures trend strength and identifies trend reversals. It consists of the positive directional movement index (green), the negative directional movement index (red), and the average directional movement index (yellow).
At press time, the negative directional movement index at 24.13 rested above the positive directional movement index at 19.78. The metric indicated that sellers’ strength exceeded the buyers.
Also, since the hack, AAVE’s Awesome Oscillator has been marked with red histogram bars that are positioned below the zero-center line. This indicator is often used to track the market’s momentum.
When it returns to red bars that are below the center line, it suggests bearish market conditions. Many traders interpret it as a signal to go short as they expect the asset’s price to decline further.
How much are 1,10,100 AAVEs worth today?
Likewise, at the time of writing, AAVE’s key momentum indicators were positioned below their respective neutral lines. This indicated a steady decline in the alt’s accumulation.
Source: AAVE/USDT on TradingView
Since the hack, AAVE’s price has fallen by 15%. At press time, it traded at $63.57, data from CoinMarketCap revealed.
