Aave's USDT Liquidity Plummets 84% After $570M Withdrawal

Aave, the largest decentralized lending protocol, has experienced a significant drop in USDT liquidity following a massive withdrawal by a wallet linked to HTX, a crypto exchange connected to Justin Sun. According to on-chain analyst EmberCN, the wallet removed $570 million USDT from Aave’s lending pool within three hours, reducing the available borrowable USDT liquidity to $91.95 million.

EmberCN noted that the sudden exit caused immediate market shifts. The analyst pointed out that USDT interest rates on Aave spiked sharply, with deposit rates jumping from 3.8% to 29%, and borrowing rates climbing from 4.4% to 33.6%. These elevated rates often attract yield-seeking depositors and encourage borrowers to repay, potentially stabilizing the liquidity imbalance.

On the other hand, Sentora, a blockchain analytics firm, estimated that the withdrawal was around $400 million and noted that it accounted for 93% of the available USDT in that pool. This has resulted in high utilization, effectively trapping other large depositors who cannot exit without incurring slippage or unfavorable rates.

Marc Zeller, founder of the Aavechan Initiative, downplayed community concerns in a statement, describing the situation as a “Small liquidity crush” affecting Aave v3’s USDT market. He expressed confidence that the issue would resolve quickly as new capital flows in to capitalize on the elevated yields. He stated: “It’s just Justin Sun apeing around. Not the first time. We have large LP that will deposit situation back to normal in a few hours.”

Despite the liquidity issues, Aave remains the dominant protocol in the DeFi lending space. Data shows that the platform has more than $40 billion in total value locked (TVL), with active loans reaching $16.5 billion. Aave’s continued relevance is highlighted by its continued institutional adoption. Recently, the Ethereum Foundation borrowed $2 million in GHO stablecoins using wrapped ETH (wETH) as collateral via the Aave protocol, highlighting confidence in its infrastructure even during short-term liquidity stress.