Is This Another Market Bottom Signal?

Extreme fear surrounds AAVE after exploit-driven outflows, but whale order clusters historically linked to market bottoms are reappearing.

AAVE is undergoing one of its most volatile periods in recent history following the April 18 exploit of KelpDAO’s rsETH bridge. Attackers used the stolen assets as collateral on Aave V3, borrowing approximately $196 million in wrapped ETH and leaving the protocol with bad debt.

In the immediate aftermath, Aave recorded a sharp contraction in deposits, as roughly $8.45 billion exited the platform within 48 hours. The AAVE token has since plunged by 17%, currently trading around the $92 level.

Panic or Opportunity?

Despite these developments, CryptoQuant flagged a major trend emerging from on-chain and market data. The analytics firm stated that Aave’s Spot Average Order Size metric, which measures the average size of executed spot trades by dividing total volume by trade count, showed elevated readings within the “Big Whale Orders” category. This was indicative of an increased participation from large investors.

Historical data since late 2022 suggests that clusters of such whale activity have consistently aligned with local or wider market bottoms in AAVE’s price. These instances were observed during the 2022 bear market lows, mid-2023 consolidation phases, corrections throughout 2024, and again in early 2025.

While these patterns do not guarantee immediate reversals, they have typically marked favorable risk-reward zones.

As sentiment indicators reflect heightened fear levels similar to those during the 2022 downturn, whale order size has risen again, suggesting potential accumulation. CryptoQuant further added that the outcome remains uncertain but explained that similar conditions previously attracted strategic buying.

The firm also said that market participants should monitor the resolution of Aave’s Umbrella reserve coverage for the estimated $196 million deficit and whether high whale activity continues within the $85 to $95 range.

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Aave Liquidity Crisis

Zooming out, crypto analyst Duo Nine described the conditions on Aave as highly strained after the exploit, while noting that several core markets reached 100% utilization, which effectively stopped users from withdrawing their funds. Duo Nine explained that large investors quickly pulled billions from the protocol following the rsETH incident linked to KelpDAO, which rapidly drained liquidity across major pools like ETH, USDT, and USDC. As a result, users who did not exit early were left unable to access their assets.

The ETH market hit 100% utilization, which not only blocked withdrawals but also limited the protocol’s ability to carry out liquidations if prices moved sharply, increasing the risk of additional bad debt. Over time, the same issue spread to stablecoin markets, which ended up leaving more funds locked. According to the market commentator, some users attempted to exit by borrowing against their locked positions and accepting losses, while others used platforms such as Uniswap to sell tokenized assets.

Any new liquidity entering the system was quickly removed, often within seconds.