Aave price plummeted nearly 20% to around $90 by Monday morning following a massive exploit at Kelp DAO that left the protocol saddled with roughly $196 million in bad debt.

According to data from crypto.news, Aave (AAVE) price fell from $106 on Sunday to an intraday low of $89 on Monday before backpedaling on some of its losses and stabilizing at $91 when writing.

Aave price crashed following a steep contraction in Aave’s total value locked, which fell by nearly $8 billion over the weekend. As reported by crypto.news earlier, the drop came after attackers linked to the $293 million Kelp DAO exploit tapped liquidity from Aave, leaving close to $195 million in “bad debt” on the protocol and prompting a wave of withdrawals.

Figures from DeFiLlama show Aave’s TVL dropped from roughly $26.4 billion to $17.5 billion by Monday, costing it its position as the largest DeFi protocol.

Crypto analytics platform Lookonchain noted that the drop came as some of the largest crypto whales withdrew funds from Aave during the turmoil. Notably, MEXC crypto exchange and Abraxas Capital withdrew $431 million and $392 million, respectively, while another unmanned whale withdrew $405.7 million.

While the Aave team confirmed it had frozen rsETH markets on its V3 and V4 deployments, the incident raised concerns over protocol security and has prompted retail investors to exit their positions rapidly.

Derivatives positioning signals potential upside ahead

Despite the selloff, derivatives positioning suggests that sentiment may not be entirely bearish.

According to data from CoinGlass, the open interest in Aave’s future markets has risen by 17% to $316.5 million in the past 24 hours. At the same time, its weighted funding rate has dropped into the red territory.

When a rise in OI coincides with a negative funding rate, such conditions often precede a short squeeze, where aggressive sellers are forced to cover their positions, leading to price appreciation for the asset involved.

Another factor suggesting a bullish outlook for Aave price is strong Aave outflows from exchanges. Despite the recent turmoil, investors have withdrawn over $4 million from exchanges, likely moving them to self custody as they remain optimistic over a long-term recovery.

On the daily chart, the MACD indicator remains positive with green histograms, suggesting that the broader bullish momentum remains intact despite the recent volatility. At the same time, the Aroon Up is at 78.57%, much higher than the Aroon Down at 7.14%, which means that a strong uptrend is still technically in place.

For now, $100 serves as the immediate resistance level to watch, as a decisive break back above the psychological threshold could restore market confidence and hence ignite a rally toward previous monthly highs.

On the contrary, failure to hold $90 as support could lead to further panic selling and push the price down to test the next major support zone at $75.