A colossal sum of $1.7 billion worth of ETH has been spirited away from Aave, a mysterious operation that has left the community in a whirlwind of speculation and panic. It seems our dear friend, Justin Sun, the illustrious founder of Tron, has been up to his usual antics, reportedly withdrawing at least $600 million. What a grand spectacle!
The great exodus of ETH from Aave has left a gaping hole in liquidity, a void so vast one might mistake it for the abyss itself.
Ethereum Whale’s Dance Leads to a Staggering sETH Plunge
The continuous departure of these ethereal whales has sent the utilization rates soaring, akin to a hot air balloon caught in a gale, pushing ETH borrowing rates to dizzying heights.
As the cost of borrowing soared, the once-profitable leveraged staking strategies began to crumble like a house of cards. Poor souls, they thought they had the Midas touch, only to find their golden dreams tarnished by the harsh realities of market forces.
Among the most affected was the beloved stETH/ETH leverage loop. Oh, how the mighty have fallen! On July 14, the price of sETH plummeted from a lofty $2,800 to a mere $2,200, a descent so swift it could make one’s head spin.
Typically, users would deposit ETH, borrow against it, purchase stETH, and repeat the cycle ad infinitum, all in pursuit of those sweet staking yields. Alas, the rising borrowing costs and the weakening stETH peg turned this once-lucrative strategy into a losing proposition.
Desperate to cut their losses, many began to rush to redeem their stETH for ETH, creating a bottleneck in the staking withdrawal queue, a queue so long it would make even the most patient of saints lose their temper. Currently, the queue stretches for about 18 days, a veritable eternity in the fast-paced world of DeFi.
To avoid the agonizing wait, some users opted to offload their stETH on secondary markets, leading to a depeg of roughly 0.3%. A small number, you say? Tell that to the leveraged traders who found themselves facing potential losses of 3% on 10x leverage. Ouch!
What happens when Justin Sun withdraws 600M of $ETH from Aave?
• ETH Borrow & Lend rates spike
• The backbone of DeFi, LST looping, is temporarily unprofitable
• The market stETH / ETH rate depegs ~0.3%How DeFi’s biggest moves can suddenly spook leverage loopers
— Marcin | RedStone ETHWarsaw (@MarcinRedStone) July 23, 2025
The slight depegging, though seemingly minor, poses significant risks for those who dared to dance with leverage. As interest continues to accrue, the threat of liquidation looms large, a specter that haunts the dreams of many a trader.
1. Justin Sun pulls ETH supply from Aave.
2. Utilization spikes ETH borrow rates on Aave.
3. stETH loopers are now unprofitable, so start de-leveraging.
4. A bunch of this de-levered stETH hits the staking withdrawal queue.
5. stETH depegs 30 basis…
— darkpools (@0xdoge_bull) July 23, 2025
This series of events serves as a stark reminder of the fragility inherent in the DeFi ecosystem. A single large withdrawal can send shockwaves through the market, disrupting lending rates, breaking popular strategies, and exposing the vulnerabilities of oracles and delayed redemption mechanisms.
As the peg continues to drift, lenders find themselves in a bind, their fate tied to the whims of redemption rates rather than the cold, hard reality of market prices. Such is the nature of this brave new world of decentralized finance, where fortunes can be made and lost in the blink of an eye. 🤷♂️💸
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2025-07-23 22:13