Cryptocurrencies,  Security

Aave Run Hurts Institutional Adoption of DeFi: JPMorgan

Incident ‘raises questions about the future of DeFi’

By  / April 23, 2026 /

The recent $293 million hack of Kelp DAO has knocked $20 billion off of the total value locked (TVL) in decentralized finance, according to JPMorgan.

DeFi was the unintended victim of the Kelp DAO hack, with some $230 million worth of fake tokens used to borrow on the Aave lending platform. That bad debt saw Aave lose $10 billion in total value locked, referring to the value of tokens deposited in Aave’s lending pools.

But the damage isn’t limited to Aave, said JPMorgan analysts led by Nikolaos Panigirtzoglou in an April 23 report. In the days following the April 18 exploit of Kelp DAO, another $10 billion has moved off of DeFi projects with no exposure to the hack.

And, institutional investors have taken notice.

“The incident triggered outflows from pools with no direct exposure to the compromised asset, showing that DeFi’s interconnectedness can be a weakness during adverse events,” Panigirtzoglou’s report said. “This raises questions about the future of DeFi and whether DeFi can achieve the organic growth needed to support broader institutional adoption.”

Indeed, the persistent security vulnerabilities — some $600 million has been lost to hacks and exploits in April so far — and stagnant TVL “continue to limit DeFi’s institutional appeal, while each successive exploit reinforces a flight-to-safety pattern.”

Unlock Aave

USDC stablecoins locked on Aave have essentially been frozen for four days, as the bank-run style withdrawals triggered by the Kelp DAO hack have left the lending protocol stuck at 100% utilization, leaving no way to withdraw funds as there is no liquidity left.

Gordon Liao, head of research at USDC stablecoin-issuer Circle, has suggested a way to get out of the freeze: He would raise the maximum borrowing rate for USDC as high as 50% in order to incentivize users to repay debt, supplying liquidity.

By attracting capital, depositors should be able to withdraw funds successfully.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics.