Fluid Emerges as DeFi Alternative After KelpDAO Incident Drains $10B from Aave

Gate News message, April 22 — Following the KelpDAO incident on April 18, 2026, Aave experienced a severe liquidity crisis despite Aave founder Stani Kulechov's assertion that the protocol was not hacked or compromised. Aave's total value locked (TVL) plummeted from $26.3 billion to $16.4 billion, representing a $9.94 billion loss within four days, while DeFi alternatives like Fluid gained prominence.

Fluid launched a WETH Redemption Protocol without prior announcement, leveraging its lite vault's wstETH collateral to create inverted positions against Aave's frozen pools. The protocol allowed users stuck on Aave to exchange their ETH collateral for wstETH or weETH without relying on Aave's depleted liquidity. According to Castle Labs, Fluid processed 166,722 aETH (approximately $400 million) through the redemption protocol in just two days, with on-chain data confirming cumulative aETH collateral swap volumes reaching over 84,000 ETH between April 20 and 21. Fluid subsequently expanded the protocol to Arbitrum and Base with a queue-based system for traders to safely unwind risky positions.

Aave's total supplied amount fell from $45.8 billion to $35.7 billion, while stablecoin borrowing rates spiked as depleted pools forced lenders to borrow against their own locked assets. Total DeFi TVL declined from $99.5 billion to $86.7 billion, marking its lowest level in over a year. However, capital did not entirely leave the ecosystem: Spark's TVL rose to $4.552 billion (an $825 million increase) during the same period. Despite the significant losses, Aave retains the highest TVL among protocols and generates $560 million in annualized fees, with continued backing from institutional investors including Grayscale and the Bank of Canada.