Aave TVL plunges 33% after Kelp hack: can AAVE still rally?

The DeFi ecosystem has been rattled since the Kelp hack a few days ago.

The exploit has affected other DeFi platforms, including Aave, which has seen its Total Value Locked (TVL) drop by 33% over the past few days.

However, AAVE, the native coin of the Aave ecosystem, remains in the green and could rally higher in the near term. 

Aave’s TVL plunges by 33%

Decentralized finance (DeFi) protocol Aave has seen a sharp decline in activity, with its total value locked (TVL) falling 33% over the past week.

Data obtained from DeFiLlama shows that Aave’s TVL now stands at $16.7 billion, down from the $34 billion recorded in January. 

Aave’s on-chain revenue also dropped from $1.1 million in early February to $625,000 on Monday.

The decline comes despite a broader recovery across the cryptocurrency market, with major tokens posting gains amid improving macro and geopolitical sentiment.

The decrease in TVL can also be traced to last week's $293 million exploit involving Kelp DAO's rsETH token.

Hackers exploited a vulnerability in a LayerZero V2 bridge between Unichain and Ethereum on Saturday, enabling the withdrawal of 116,500 rsETH without a corresponding burn on the source chain. 

The assets were also used as collateral on Aave V3 deployments across Ethereum and Arbitrum, where borrowers opened positions against WETH and wstETH.

In response to the attack, Aave DAO quickly contained the risk.

Measures included freezing rsETH and wrsETH reserves across multiple V3 markets, setting loan-to-value ratios to zero, adjusting WETH interest rates, and restricting borrowing activity in key pools.

According to LlamaRisk, the potential bad-debt scenario ranges from $123.7 million to $230.1 million, depending on how losses are distributed.

In addition to the Kelp hack, Aave's recent governance tensions have also contributed to the decline. 

Aave DAO’s recent prolonged disputes over revenue allocation, fee structures, and the expanding role of Aave Labs have led to the exit of several major contributors, including BGD Labs, Chaos Labs, and the Aave Chan Initiative.

Despite the TVL decline, AAVE is still trading above $92, up by less than 1% in the last 24 hours.

AAVE establishes support at $87

The AAVE/USD 4-hour chart reflects a weak but stabilizing structure amid broader DeFi uncertainty.

AAVE is trading at $92.34, with a bearish near-term bias as price remains below the 20-, 50-, and 100-period Exponential Moving Averages (EMAs), indicating continued downward pressure.

Momentum indicators reinforce this view. The Relative Strength Index (RSI) sits around 40, while the Stochastic Oscillator hovers near 15, suggesting oversold conditions but only tentative signs of stabilization.

Taken together, this points to sellers still in control, with any short-term recovery likely to face resistance unless momentum strengthens meaningfully.

The bulls are trying to establish a strong support at $87.

If the support level holds, AAVE could rally towards the immediate resistance at $98, followed by the 50-period EMA around $105.22 and the 100-period EMA near $121.46.

A daily candle close above these levels could expose the more distant horizontal barrier at roughly $132.12 and the major cap near $182.21.

However, if the bears regain control, immediate support is seen at the TLQ level around $87.30, with further demand expected near $77.11.