Crypto exchange Coinbase (COIN) is working with Bybit, one of the largest crypto trading platforms, to explore ways to tokenize, custody and distribute assets such as U.S. public and pre-IPO stocks, a person familiar with the plans told CoinDesk.
The talks, which are ongoing, do not involve any sort of stake acquisition or similar deal for Bybit to enter the U.S., said the person, who asked to remain anonymous because they are directly involved in the discussions, dismissing a report of an investment publicized last month.
It makes sense for Bybit to partner with an American company, the person said, because the U.S. is home to certain assets that global users want. Bybit is international, while Coinbase is U.S.-focused.
Working together, the two can bring U.S. assets to a wider market in, for example, Asia, according to the person. Within five years, tokenization will bring any asset to users globally through a single app.
“Even if Coinbase becomes a super app in the U.S., they are still only in the U.S,” the person said.
The two companies’ explorations into tokenized stocks come as other market participants explore similar link-ups. Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, in March announced it was taking a stake in crypto exchange OKX. Just last week, Deutsche Boerse, made a $200 million strategic investment into Kraken.
Bybit’s plan to enter the U.S. market does involve a local partner, but it’s not Coinbase, the person said.
The new U.S.-focused joint venture, said to be spearheaded by former Bybit co-CEO Helen Liu, will involve an unidentified “local partner who is going to provide license and compliance.” Bybit will to provide tech, product and liquidity.
The U.K. has launched its first-ever sovereign AI fund, designed to encourage the country’s AI innovators and create jobs and growth.
The government said it will invest £500 million, or $675 million, to back the country’s brightest AI startups, helping them to bring their ideas to life in the U.K., while scaling globally.
The initiative will essentially work along the same lines as a venture capital fund. In a statement late last week, the government said the country had to become “an AI maker, not just an AI taker.”
As well as providing recipients with capital, the backing of the state will reduce some of the regulatory hurdles that can often prove to be obstacles for fledgling companies.
Successful applicants will get benefits such as fully funded access to the U.K.’s largest AI supercomputers. Up to a million GPU hours will be made available for each startup.
A loosening of the U.K.’s visa process is also in place. The streamlined process will deliver visa decisions within a day, according to the government, and give participating firms access to 10 cost-free visas — moves designed to attract global AI talent.
Related:US, California Use Purchasing Power to Set AI Rules
Specific government support is promised, too, in areas such as data access, procurement and product validation.
“Sovereign AI is unlike anything government has ever done before. Its unique approach will help break down the barriers that have too often held back British enterprise and innovation,” the U.K.’s Technology Secretary Liz Kendall said in a statement. This is how we ensure Britain’s economic prosperity and national security in the modern age.”
Sovereign AI’s first equity investment will be in London-based Callosum, an infrastructure startup whose technology enables different types of chip architectures to work together to train and operate AI models.
Another six firms will be granted access to the U.K.’s AI Research Resource supercomputer network, with Sovereign AI getting first refusal on future investments for several of the recipients.
The companies are: Prima Mente, which is using AI to better understand brain diseases Alzheimer’s and Parkinson’s; Doubleword, which is focused on inference infrastructure; Cosine, a frontier lab developing AI agents to work in defense and national security; Cursive, a firm formed by Google DeepMind alumni to develop AI agents; Odyssey, which is developing world models; and Twig Bio, a biotech company.
Sovereign AI was launched at the headquarters of Wayve, the London-based company that has become one of Europe’s most valuable AI companies thanks to its “embodied AI” system for autonomous vehicles. “We’re excited to see the next generation of British AI companies benefit from the funding opportunities available and join us in supporting the U.K.’s expanding AI ecosystem,” CEO Alex Kendall said in a statement.
Related:The Real AI Shift Isn’t New Models. It’s Control.
Bitcoin (BTC) begins the last full week of April juggling fresh US-Iran war fears as resistance hurdles line up.
Key points:
Bitcoin stays green on weekly time frames with multiple nearby price levels in focus.
Elliott Wave analysis concludes that $81,000 is Bitcoin bulls’ next “final boss.”
A resurgent US-Iran war threatens to unravel last week’s crypto and risk-asset gains.
Bitcoin ETFs see major inflows, but investors’ cost basis is still above $80,000.
Bitcoin’s true market mean metric reveals that the current bear market remains “mild.”
BTC price can still make “new highs” this week
Bitcoin still managed a “green” weekly candle despite last-minute sellers driving price below $74,000.
Data from TradingView shows a modest recovery ensuing as the new week begins — despite the lingering threat of geopolitical escalation between the US, Israel and Iran.
Price now has multiple resistance levels overhead, with the nearest being its 21-week exponential moving average (EMA) at $78,400.
Over the weekend, trader and analyst Rekt Capital stressed the influence of that trend line.
“Bitcoin is rejecting from the 21-week EMA (green),” he noted in an X post alongside a print of the weekly chart.
“It is this rejection that could force a post-breakout retest of the top of the Double Bottom (~$73k) next week, provided Bitcoin Weekly Closes just like this.”
BTC/USD one-week chart. Source: Rekt Capital/X
In a subsequent post, Rekt Capital said that a successful retest of the $73,000 area would “confirm the breakout” for the bulls.
A Weekly Close just like this could confirm the 21-week EMA (green) as resistance to set up for a post-breakout retest of the Double Bottom formation top (blue ~$73k)
Continuing, trader CrypNuevo forecast that BTC/USD would continue to trade in a range with an $80,000 ceiling “for the next month.” They acknowledged that it was “unknown” how high the pair could go should the US-Iran war definitively end.
BTC/USDT one-day chart. Source: CrypNuevo/X
Crypto trader Michaël van de Poppe, meanwhile, remained upbeat, seeing a push beyond last week’s local highs next. He noted that there was a new “gap” open above price in CME Group’s Bitcoin futures market.
“Relatively strong bounce upwards on $BTC on Monday, as markets tend to go risk-off prior to the open. Gold has gone down, so no attached risk,” he told X followers on Monday.
“Bitcoin bouncing upwards, and given that there’s still a gap to $77.3K, I would assume we’re going to see new highs this week.”
BTC/USDT 12-hour chart. Source: Michaël van de Poppe/X
$81,000 emerges as Bitcoin’s “final boss”
In its latest BTC price analysis, crypto market intelligence platform Decode placed specific emphasis on $81,000 as the resistance level to beat.
As part of Elliott Wave analysis, Decode showed BTC/USD trading between the 200-week and 21-week EMAs.
“Bitcoin still pinned below the 21 week ema, but looking pretty good overall, and with the final boss at 81k,” it commented.
This “final boss,” Decode explained in subsequent debate on X, “narrows the options from an Elliott Wave perspective, removing short term bearish counts.”
BTC/USD one-week chart. Source: Decode/X
$81,000 also represents the average entry price for institutional buyers of the US spot Bitcoin exchange-traded funds (ETFs).
Nearby, the cost basis for Bitcoin’s short-term holders (STHs) — entities hodling for up to six months without selling — is now at $83,500, per data from onchain analytics platform CryptoQuant.
Bitcoin STH cost basis data. Source: CryptoQuant
CryptoQuant notes that the STH spent output profit ratio (SOPR) metric — the ratio of STH coins moving onchain in profit or loss — is circling breakeven.
“If SOPR manages to sustainably move back above 1, it would indicate that STHs are once again realizing profits, which is generally positive for the market as long as values do not become excessive,” contributor Darkfost wrote in a “QuickTake” blog post last week.
Iran war comeback risks risk-asset “unwind”
The US will release little by way of macroeconomic data in the coming week, but markets have bigger concerns.
With the sudden comeback of the US-Iran war, traders are suddenly revisiting the prospect of higher oil prices and a longer-term knock-in effect on inflation.
“The sudden change in events has characterized the Middle East conflict since it started at the end of February,” trading resource Mosaic Asset Company commented in the latest edition of its regular newsletter, “The Market Mosaic.”
“And it appears that intensifying hostilities could unwind the bullish action over the past few weeks.”
WTI crude oil fell to its lowest levels since early March last week as markets increasingly bet on the ceasefire and agreements between the US and Iran holding. The fresh breakdown in diplomacy sparked a rebound toward $90 per barrel.
BREAKING: US oil prices surge +7%, rising above $89/barrel, as markets react to Iran closing the Strait of Hormuz and denying reports of a second round of talks with the US. pic.twitter.com/Tmtt8idhsr
Continuing, however, Mosaic warned that the writing was already on the wall for the equities rally after the S&P hit fresh all-time highs.
“Simply following breadth, sentiment, and positioning by institutional investors helped flag the recent rally. At the same time, warning signs were already emerging as the S&P 500 broke out to record highs,” it wrote.
“The number of stocks breaking out to new highs is failing [to] confirm the move in the indexes, while buying pressure from a key group of institutional investors has largely run its course.”
S&P 500 relative highs. Source: Mosaic Asset Company
As Cointelegraph reported, oil prices in particular are under the microscope as a US inflation catalyst. The next print of the Consumer Price Index (CPI), which will reflect the ongoing impact of the war during April, is due for release on May 12.
Risk-on institutions wake up to Bitcoin
The upshot in risk appetite amid Iran relief had a near-instant impact on Bitcoin institutional investment vehicles.
In particular, the US spot ETFs saw considerable capital inflows through Friday, with more than 25,000 BTC entering over five days.
“The latest accumulations by spot ETF firms are significant, as the last time they posted a figure this close was in April 2025, when they added 23,900 units,” CryptoQuant noted in a “QuickTake” blog post on the topic.
US spot Bitcoin ETF netflows (screenshot). Source: Farside Investors
Data from UK-based investment company Farside Investors confirms that on Friday alone, the net inflows to the ETFs were more than $660 million — the largest single-day total since January.
“Aside from the current milestone, BTC spot ETFs are recovering,” CryptoQuant continued.
“The balance held by the firm offering them has been declining since October, but has risen since the February dip.”
US spot Bitcoin ETF holdings data. Source: CryptoQuant
In BTC terms, the ETFs’ total holdings are now at their highest since November 2025.
GM ☕️
Last week we have seen –
– One of the highest inflows into #bitcoin ETPs. – Record bitcoin purchases by $MSTR.
Yet, $BTC has failed to reclaim the ETF cost basis (~$81k).
Commenting on X, Andre Dragosch, European head of research at crypto asset manager Bitwise, acknowledged that ETF investors’ cost basis is still above spot price at $81,000, increasing the psychological significance of that level as a resistance hurdle.
Bitcoin price downside still on “milder path”
The average Bitcoin hodler remains underwater despite the recent trip to ten-week highs for BTC/USD.
Related: Bitcoin can grow ‘probably a lot bigger’ than $30T+ gold market — Analysis
New research from onchain analytics platform Glassnode also warns that in terms of history, Bitcoin’s current bear-market drawdown remains “mild.”
In an X article published on Thursday, lead analyst CryptoVizArt used the true market mean (TMM) metric to assess hodler profitability. TMM filters out long-dormant or lost coins to provide a more accurate picture of cost basis for the active BTC supply.
“When BTC trades below TMM, the average active holder is underwater. Since 2016, this has happened ten times with meaningful negative outcomes — episodes lasting from 2 days to over 11 months, with max drawdowns ranging from -0.1% to -57%,” they summarized.
Bitcoin true market mean chart. Source: Glassnode
Bitcoin is now over 75 days into its latest sub-TMM phase, with TMM itself at $78,200.
A chart plotting 2026 against Bitcoin’s historical average dips below TMM shows price forging a “milder path” than before.
“That said, 75 days is still early. The 2018 and 2022 episodes didn’t bottom until months 5-9,” CryptoVizArt warned.
“The signal isn’t ‘all clear’ — it’s ‘watch closely.’ Reclaiming the TMM and stabilizing there would mark active investors returning to profit, historically a strong reset point for momentum.”
This article is produced in accordance with Cointelegraph’s Editorial Policy and is intended for informational purposes only. It does not constitute investment advice or recommendations. All investments and trades carry risk; readers are encouraged to conduct independent research before making any decisions. Cointelegraph makes no guarantees regarding the accuracy or completeness of the information presented, including forward-looking statements, and will not be liable for any loss or damage arising from reliance on this content.
Market dynamics continue to paint a bullish picture for bitcoin BTC$75,263.35 even as Iran-related developments and DeFi hacks dominate headlines.
U.S.-listed spot ETFs pulled in $663 million on Friday, the most since Jan. 15. Total inflows reached $996 million last week, up from $786 million the week prior, according to data source SoSoValue. This points to strong institutional interest in the largest cryptocurrency.
For a meaningful price rally to emerge, it’s a trend that needs to be sustained.
“ETF flow regimes provide a secondary read: Sustained inflows signal structural demand, while intermittent flows indicate tactical positioning, with consistency mattering more than magnitude,” said Timothy Misir, head of research at BRN, in an email.
Bitcoin is trading just above $75,000 after hitting highs above $78,000 on Friday, according to CoinDesk data. The prices has largely held steady over the past 24 hours. Similar patterns are evident in ether (ETH), XRP (XRP), Solana (SOL) and other major tokens.
DeFi platform Aave’s AAVE token has dropped 1% to $90 as the protocol faces collateral damage from the weekend hack of KelpDAO. The DeFi dominance rate, which measures the share of DeFi coins in the total crypto market value, has held flat at around 3%.
“The pressure on the leading cryptocurrency is linked to negative reactions in stock markets to news about Iran, which has reduced risk appetite. BTC has lagged significantly behind equities in recent days, building potential but not yet moving to realize it,” Alex Kuptsikevich, the chief market analyst at FxPro, said in an email.
According to the latest reports, the U.S. attacked and seized an Iranian cargo ship attempting to bypass restrictions on Iran’s ports.
Meanwhile, traders are actively building short positions, betting against a breakout. This could fuel a “short squeeze” if prices hold steady, forcing traders to cover bearish bets and potentially pushing spot prices higher. Stay alert!
Read more: For analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today . For a comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead.”
What’s trending
Today’s signal
Solana’s SOL price trades below key support for the 12th straight week. (TradingView)
The chart shows weekly price swings in solana (SOL), with each candle showing a full week of trading activity, including the opening, closing, high and low prices.
One level stands out: $95.16, the low registered in April.
SOL has remained below that level for 11 consecutive weeks after dropping below it in early February. In technical analysis, a level that previously acted as “support,” a price floor where buying interest tends to emerge, often becomes “resistance” once it is broken. That means traders who previously bought around that level may now look to sell if prices revisit it, limiting upside momentum.
The fact that SOL has not yet climbed back points to a sustained bearish sentiment and potential for deeper losses. The next major support is seen directly at $50.
A strong move above that level, backed by a surge in trading volumes, is needed to invalidate the bearish outlook.
Michael Saylor’s Strategy (MSTR) added 34,164 bitcoin to its treasury over the past week at an average price of about $74,395 per coin, for a total cost of roughly $2.54 billion, according to a Monday filing.
The purchase brings the company’s total holdings to 815,061 BTC, acquired for approximately $61.56 billion at an average cost basis of $75,527. With BTC currently trading at around $75,000, Strategy’s stash is currently break even. Strategy is the world’s largest publicly-listed bitcoin holder. It began acquiring BTC as a balance sheet asset in 2020.
Last week’s acquisitions were funded by $2.2 million raised through sales of the company’s preferred stock, Stretch (STRC), and $366 million from common stock offerings.
MSTR shares are down more than 2.5% in pre-market trading.
PayDo, the UK-licensed Electronic Money Institution, has officially launched new customer-to-business (C2B) settlement accounts. The new feature, housed within its all-in-one electronic money solution, is designed to help merchants accept and rapidly settle payments made directly from customers’ bank accounts.
The rollout expands PayDo’s payment capabilities beyond the standard business-to-business (B2B) services typically offered to online merchants. Built specifically to handle open banking payment flows, the C2B accounts are designed to reduce settlement delays, eliminate the need for manual payment requests, and provide merchants with instant payment confirmations.
Settling in under two seconds
The operational efficiency of the new accounts relies on speed. When a customer selects a pay-by-bank option at a digital checkout, the payment is initiated through their personal banking app and transferred directly into the PayDo ecosystem.
Once the funds are received by the system, they are settled directly to the merchant’s business account in under two seconds. The merchant is then provided with an immediate notification that the funds have cleared.
By supporting these direct C2B bank payments, PayDo aims to help merchants improve their overall settlement speed, simplify their day-to-day payment operations, and gain greater visibility over incoming funds through a single, unified account structure.
Serhii Zakharov, CEO and founder of PayDo, emphasized the practical impact of the new feature.
“We’ve moved the needle from making open banking possible to making it operationally effective for businesses processing significant payment volumes,” Zakharov stated. “This is how a promising payment rail becomes a more practical and reliable part of day-to-day commercial infrastructure.”
Meeting the demand for alternatives
The launch reflects a broader industry demand for payment methods that combine a smooth user experience with faster settlement and lower operational friction. Under this model, customers can pay without manually entering lengthy account details, while merchants benefit from quicker access to their funds—representing a potentially more cost-effective alternative to traditional card payment flows.
The new solution is built entirely on Payment Initiation Services technology. It sits firmly within PayDo’s wider business account ecosystem, which currently enables merchants to receive funds, manage their balances, pay suppliers, and move money globally from a single platform.
In addition to its new settlement capabilities, PayDo continues to offer merchant accounts and checkout services featuring Visa and Mastercard acquiring, alongside access to more than 350 alternative payment methods.
Cryptocurrency investment products logged another week of strong inflows on ceasefire optimism and a Bitcoin price breakout driving investor sentiment.
Crypto exchange-traded products (ETPs) posted $1.4 billion in inflows last week, beating the prior week’s $1.1 billion and marking the second-largest weekly inflows since January, CoinShares reported on Monday.
Following the three-week inflow streak totaling $2.7 billion, crypto ETPs now have net year-to-date inflows of around $3.8 billion, with assets under management (AUM) at $154.8 billion — the highest level since early February after dipping to as low as $128 billion in March.
The uptick in crypto funds has likely been driven by a recovery in risk appetite on US-Iran ceasefire extension talks, CoinShares head of research James Butterfill said.
The sentiment was further reinforced by Bitcoin (BTC) nearly touching $78,000 on Friday, according to CoinGecko.
Ether funds turn positive year to date
Bitcoin led last week’s ETP gains by a significant margin, with inflows totaling $1.12 billion. The gains brought year-to-date inflows to $3 billion, with AUM at $123 billion.
The majority of gains were contributed by US spot Bitcoin exchange-traded funds (ETFs), which posted $1 billion in inflows last week.
Ether (ETH) investment products also picked up with $328 million inflows in its strongest week since January, finally lifting the ETPs into green year-to-date with $197 million inflows.
Crypto ETP flows by asset (in millions of US dollars). Source: CoinShares
Still, altcoin ETPs, including XRP (XRP) and Solana (SOL), recorded negative flows, with XRP leading the outflows at $56 million. Solana recorded minor outflows of $2.3 million.
Short-Bitcoin products saw a modest $1.4 million of inflows, suggesting residual but limited hedging demand.
Regionally, the US dominated the surge with $1.5 billion of inflows, while Germany ranked second with just $28 million of inflows. Switzerland saw the largest redemptions last week, with outflows totaling $138 million.
Addressing the implications of recent economic data, CoinShares’ Butterfill suggested that March’s Consumer Price Index (CPI) increase of 3.3% appears to have been largely looked through by markets, with core CPI at 2.6% seen as relatively contained, pointing to inflation pressures that remain more supply-driven than broad-based.
Related: Bitcoin erases weekend gains as US-Iran ceasefire faces pressure
Nomura’s Laser Digital echoed that view, telling Cointelegraph that backward-looking macro indicators currently offer only limited insight while conflicts continue to affect supply chains and spending patterns.
“Delayed indicators like CPI and PMIs mostly reflect past conditions rather than the current situation,” Laser Digital said, adding that the outlook remains “cautiously optimistic.”
The Crypto Fear & Greed Index. Source: Alternative.me
Sentiment improvement was also reflected in the Crypto Fear & Greed Index, which moved from “extreme fear” to “fear,” with the score rising above 29 on Monday for the first time since Jan. 29.
Magazine: Bitcoin ‘on track’ for $90K, ETFs pull in nearly $1B: Hodler’s Digest, April 12 – 18
Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently. Read our Editorial Policy https://cointelegraph.com/editorial-policy
Ethereum Name Service gateway eth.limo has revealed that the domain hijacking on Friday was caused by a social engineering attack directed against EasyDNS, its domain name service provider.
According to a postmortem published by eth.limo on Saturday, an attacker impersonated one of its team members to initiate an account recovery process with easyDNS, granting access to the eth.limo account and allowing them to alter domain settings.
“The NS records were changed and directed to Cloudflare… Once we understood that a DNS hijack had taken place, we immediately notified the community as well as Vitalik Buterin and others. We then began contacting EasyDNS in an attempt to respond to the incident,” the company said.
Eth.limo serves as a Web2 bridge, providing access to around 2 million decentralized websites using the .eth domain name. Hijacking the service could allow an attacker to redirect users to malicious websites. Ethereum co-founder Vitalik Buterin warned users Friday to avoid his blog until the incident was resolved.
Mark Jeftovic, CEO of easyDNS, has publicly accepted responsibility for the incident in its own postmortem report.
“We screwed up and we own it,” said Jeftovic on Saturday.
“This would mark the first successful social engineering attack against an easyDNS client in our 28-year history. There have been countless attempts.”
Both companies have pointed to the Domain Name System Security Extension (DNSSEC) in thwarting the hacker’s attempts to do further damage.
The attacker couldn’t produce valid cryptographic signatures, so Domain Name System resolvers rejected the attacker’s forged DNS responses, causing users to see error messages instead of being redirected to malicious sites.
“DNSSEC was enabled for their domain when the attackers attempted to flip their nameservers, presumably to effect some manner of phishing or malware injection attack, DNSSEC-aware resolvers, which most are these days, began dropping queries,” Jeftovic said.
Source: eth.limo
In its postmortem, eth.limo noted that because the attacker lacked the signing keys, they were unable to bypass the safeguards, which likely “reduced the blast radius of the hijack. We are not aware of any user impact at this time. We will provide updates if that changes.”
easyDNS makes changes since the attack
Jeftovic described the social engineering attack as “highly sophisticated,” and said easyDNS is still conducting a post-mortem on how the breach occurred, and has already begun rolling out changes to prevent a recurrence.
Source: easyDNS
“In eth.limo’s case, we will be migrating them to Domainsure, which has a security posture more suited toward enterprise and high-value fintech domains, TLDR there is no mechanism for an account recovery on Domainsure, it’s not a thing,” he added.
“On behalf of everyone here, I apologize to the eth.limo team and the wider Ethereum community. ENS has always had a special place in our heart as the first registrar to enable ENS linking to web2 domains and we’ve been involved in the space since 2017.”
The eth.limo incident is the latest in a series of domain hijackings targeting crypto projects. Days earlier, decentralized exchange aggregator CoW Swap lost control of its website after an unknown party hijacked its domain.
Steakhouse Financial, a DeFi advisory and research firm, similarly disclosed at the end of March that it had lost control of its domain to an attacker.
Magazine: Will the CLARITY Act be good — or bad — for DeFi?
Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently. Read our Editorial Policy https://cointelegraph.com/editorial-policy
Latin American digital bank Plata has closed on a $405 million Series C at a $5 billion valuation.
Editorial
This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.
The round was led by Bicycle Capital with new investors Qatar Investment Authority (QIA), BTG Pactual, Valor Capital Group, and previous investors.
The bank’s value has almost doubled from a $3 billion figure secured just six months ago.
Since launching three years ago, Plata has grown to serve over 3.5 million active customers and has raised more than $2 billion in debt and equity.
The raise comes shortly after the Mexican neobank began offering deposit services alongside its initial suite of credit products. It is also eyeing regional expansion after receiving authorisation last July to operate as a financial institution in Colombia.
“This round reflects investors’ confidence not only in our execution to date, but also in the scale of the opportunity ahead,” says Neri Tollardo, co-founder and CEO of Plata. “We built a technology-led platform designed to broaden access to better financial services at scale. The launch of full banking operations in Mexico is a pivotal milestone — it expands our product range and gives us access to retail deposit funding, meaningfully strengthening our funding model for the next phase of growth.”
The company, founded by three former Tinkoff executives, built its technology infrastructure in-house, including a proprietary core banking system, CRM, and AI-powered risk engine, developed by a team of over 800 STEM professionals.
The aftershocks of the Saturday’s KelpDAO hack are spreading through stablecoin markets in ways that were not immediately obvious.
Int he first 24 hours post the attack, users on Aave borrowed approximately $300 million against their tether deposits of stablecoin tether USDT$1.0002 on the platform, according to Chaos Labs data.
The borrowing spike isn’t a sign of demand; it is a sign users can’t withdraw. With stablecoin pools maxed out, depositors are taking loans against their own funds at a loss just to access liquidity.
Think of it this way: Imagine a bank refusing to process customer fiat deposit withdrawal requests. So, out of desperation, customers take out loans on these deposits. This credit creation isn’t healthy, but a desperate move for liquidity.
“We’re now seeing some negative secondary effects of illiquidity in Aave stablecoin markets,” said monetsupply.eth, the pseudonymous head of strategy at Spark, a rival DeFi lending platform. “Because users can’t withdraw due to 100% utilization, there has been a ~$300 million increase in borrowing with USDT collateral in just the past day since the rsETH exploit.”
To understand how a single exploit on KelpDAO ended up locking every stablecoin exit on Aave simultaneously, you need to understand how the system is supposed to work — and exactly where it broke.
What is Aave and how it’s supposed to work
Aave is a decentralized finance (DeFi) protocol that enables users to lend and borrow cryptocurrencies without intermediaries. Think of it as a bank, except it runs entirely on code on a public blockchain, with no human gatekeepers.
Users deposit assets into lending pools and earn interest. Others borrow from those same pools by posting crypto assets as collateral, which exceeds the loan amount. The system is designed to self-correct automatically through interest rates. When lots of people want to borrow, rates rise, making borrowing more expensive and encouraging lenders to deposit more. When demand falls, rates drop.
The whole system operates on one core assumption: that there is always enough liquidity – enough assets in the pool – for lenders to withdraw their deposits when they want to, and for borrowers to unwind their positions when they need to.
When that assumption breaks down, everything else breaks with it. That’s what happened after the KelpDAO exploit.
rsETH and the KelpDAO exploit
rsETH is a liquid re-staking ether token issued by KelpDAO.
When you stake ether (ETH), you lock it up to help secure the Ethereum network in exchange for a yield, similar to earning interest on a bond. Some protocols issue a liquid staking token (LST) that represents your staked ETH.
Re-staking goes a step further, reusing those already-staked assets to secure additional systems, effectively stacking yield on yield. In return, you receive a receipt token representing your position. rsETH is one such receipt token and it has been widely used as collateral across the DeFi world.
On April 18, an attacker manipulated KelpDAO’s bridge infrastructure into releasing 116,500 rsETH — roughly 18% of the token’s circulating supply, worth approximately $292 million. These fake, unbacked tokens were immediately deposited into lending protocols, mostly Aave, to borrow real ETH and other assets such as wrapped ether (wETH) against them. Fake tokens in, real money out.
“That [borrowed] WETH is gone. The rsETH holding its place in the vaults is worth whatever an unbacked claim is worth — approaching zero on the L2 side, where 20+ chains held bridged rsETH backed by a now-empty mainnet lockbox,” 0xyanshu, a pseudonymous crypto operator known for work around on-chain finance and risk, said.
Aave froze rsETH markets on V3 and V4 within hours, with founder Stani Kulechov affirming the exploit was external and Aave’s contracts were not compromised. That freeze stopped the bleeding. But it also set off the chain reaction that produced the $300 million borrowing surge.
How $300 million in borrowing materialized in a single day
When the exploit news broke, whales and big funds withdrew billions of dollars worth of cryptocurrencies from Aave’s liquidity pools within hours. Because they moved first and in large numbers, their withdrawals drained liquidity pools.
“When the rsETH exploit happened and AAVE incurred bad debt, whales like Justin Sun, MEXC exchange, and others immediately withdrew billions from AAVE,” analyst Duo Nine, said in an explainer. “Initially, the ETH market hit 100% utilization, meaning you could not withdraw your ETH from AAVE.”
This soon spread to USDT and USDC pools, raising their utilization rates to 100%, as over $6 billion in assets left the protocol within hours. Every lending pool holds a fixed amount of assets deposited by users. When every dollar of those assets has been borrowed out, nothing remains for withdrawals.
“That’s because AAVE lost over $6 billion in liquidity in the past 24h,” Duo Nine wrote. “As whales took out their money, USDT and USDC also hit 100% utilization. These markets are now also stuck with money locked.”
This is when the $300 million secondary borrowing surge began.
Trapped USDT and USDC depositors, unable to simply withdraw their money, reached for the only exit still available to them. They began by drawing loans from their locked deposits.
“Some users decided to borrow against USDT/USDC and exit via other markets at a 10-25% loss,” Duo Nine explained. “Basically you borrow GHO/DAI/USDe against your locked USDT/C.” It was not a trading strategy.
It has been a desperate act of borrowing against their own money at a loss, accepting 75 cents on the dollar, just to extract any liquidity from the system at all. Aave allows users to borrow up to 75% of the total loan-to-value (LTV) of their deposited collateral, depending on the asset and its risk parameters.
“With a 75% max LTV, users with stuck USDT deposits can take out up to 3/4 of the value of their Aave position. But this ends up reducing liquidity in other markets, with USDC and USDe markets now at 100% utilization as well,” monetsupply.eth, the pseudonymous head of strategy at Spark, a rival DeFi lending platform, observed.
For anyone watching DeFi from the outside, the message is clear: “Decentralized” does not mean “without risk.”
