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As pressure on DeFi markets intensifies following the KelpDAO-related exploit crisis, leading industry commentator 0xQuit has issued a noteworthy warning. According to the analyst, the situation on Aave is “bad and getting worse.”
0xQuit stated in its assessment that multiple liquidity pools on Aave had reached 100% utilization. This situation, they explained, was causing lenders to become locked out of the system and exposing the protocol to an additional risk of “bad debt.”
The analyst also argued that lending rates have risen to 10-15%, but this yield is insufficient compared to the risk of financing a potential deficit of approximately $300 million. 0xQuit stated that the biggest uncertainty in the market is who will bear the rsETH losses, adding that the panic could dissipate somewhat once this issue is clarified.
On the other hand, it was noted that the lack of sufficient communication from both Aave and the relevant infrastructure providers (e.g., LayerZero) in the current process has increased uncertainty. 0xQuit stated, “Markets don’t like uncertainty.”
According to the analyst, even with clarity, it will take time for confidence in DeFi, and especially Aave, to return to previous levels following this event. However, if the uncertainty is resolved, the system could resume operation, albeit at lower total value locked (TVL) levels.
*This is not investment advice.