12 April, 2024

MakerDAO Surpasses Aave Following TVL Shift Post Curve Exploit

07 Aug, 2023

08 Nov, 2023

  • Aave’s TVL drops 20% due to exposure to Curve’s hack.
  • MakerDAO’s TVL rises by 2%, aided by the wsETH deposit increase.
  • Despite repayments, Egorov’s Aave debt stands at $29 million.

In the rapidly evolving world of decentralized finance (DeFi), liquidity and trust are paramount. Recently, this dynamic was evident when MakerDAO took over Aave’s position, becoming the second-largest DeFi protocol by total value locked (TVL). This seismic shift resulted from an unfortunate event that befell Curve Finance and the consequential decisions of market participants in the aftermath.

Previously, Aave briefly held the second spot, buoyed by the downfall of Silicon Valley Bank (SVB). However, an exploit at the DeFi protocol Curve Finance swiftly overshadowed this achievement, causing Aave’s TVL to plummet by nearly 20% within a week. In contrast, MakerDAO’s TVL experienced a nearly 2% rise. This boost is largely linked to the surge in deposits of MakerDAO’s wrapped staked Ether tokens (wsETH) in the wake of Curve’s breach.

Analyzing the causes of Aave’s setback, it is clear that the platform’s close association with Curve played a crucial role. Before the exploit, Michael Egorov, the mastermind behind Curve, had utilized a significant portion of his CRV tokens as collateral. Among the various DeFi lending protocols he borrowed from, Aave was at the forefront, extending a loan of over $100 million. 

The crisis that ensued the hack saw the market in turmoil, desperate to salvage whatever funds remained. This led to a rapid depreciation in CRV’s value. Consequently, there was a looming threat that Egorov’s collaterals with Aave might face liquidation.

This precarious situation spurred a wave of apprehension among Aave’s liquidity providers. Fearing potential cascading effects, many opted to withdraw their funds. Despite Egorov’s earnest endeavors to clear his debt obligations — selling CRV holdings in OTC trades — Aave’s TVL hasn’t recovered. As of August 6, Egorov’s outstanding debt with Aave amounted to $29 million, backed by collateral of 189 million CRV tokens. Data insights revealed that the loan’s health factor was precarious 2.21.

Interestingly, while Aave’s token price witnessed a 7% dip over the week, on-chain transaction metrics brought some silver lining. The daily on-chain transaction volume ratio in profit versus loss indicated favorable returns, suggesting that market players garnered more profits than losses during this tumultuous phase.

However, diving deeper into Aave’s financial health, the Market Value To Realized Value ratio (MVRV) painted a grimmer picture, highlighting that numerous investors still held their positions at a loss. At this report’s time, MakerDAO’s token price is at $1,209.98, registering a 24-hour decline of 2.67% and a weekly decline of 5.35%. The bears control the market, and the price might drop soon. On the other hand, Aave’s token marked a price of $65.35, with a slight 0.30% uptick in the past 24 hours.


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