Aave markets hit 100% utilization, signaling trouble

Aave, a major decentralized lending platform, is facing a critical liquidity crisis as all its core markets simultaneously reached 100% utilization. This unprecedented event has effectively frozen approximately $5 billion in USDT and USDC, rendering them inaccessible to users. The crisis was triggered by a $292 million exploit of the Kelp DAO rsETH bridge, which led to unbacked collateral on Aave and a subsequent bank run. Security experts warn that the lack of liquidity prevents liquidations, potentially leading to compounding bad debt and an inability for the protocol to recover without external intervention, highlighting DeFi's systemic risks.