Over the past week, whales have pulled significant amounts of Ethereum out of the Aave lending protocol, causing funding rates to rise and some positions to close sharply.
On some days, the APY for positions in wETH exceeded 10%. In this case, liquidity providers were the winners, but the users borrowing assets experienced the opposite result.
Traders who had been looping—a strategy for profiting from Ethereum staking by repeatedly depositing and borrowing—suddenly began to lose money. They closed their positions en masse, forcing liquid staking providers to stop locking coins.
As a result, a huge queue for withdrawals has formed. As of July 23, 633,896 ETH is awaiting withdrawal—a record high in history.
Thus, a temporary liquidity deficit was created.
Aave funding rates have now returned to normal, but the situation has demonstrated the extent of influence of the big players.
Who withdrew the assets?
In a conversation with DLNews, Aave contributor Mark Zeller said that he believes TRON founder Justin Sun is the main whale withdrawing funds from the protocol. According to his observations, the businessman regularly transfers and withdraws large sums.
According to the Arkham dashboard, wallets marked as belonging to Sun have moved about $650 million out of Aave and into Ethereum in recent days. His addresses still hold $390 million worth of stETH.
"[Sun] is simply unpredictable. He trades billions the same way I go grocery shopping," Zeller wrote in a Telegram chat discussion.
Addresses associated with the HTX crypto exchange also moved approximately $450 million worth of coins out of the protocol.
