A sudden liquidation cascade has shaken the DeFi lending giant Aave, wiping out roughly $27 million in positions within 24 hours. The event appears to have been triggered by a temporary pricing mismatch involving wstETH, the liquid staking token from Lido, according to reports and on-chain analysis.
The incident began when Aave’s risk-control oracle briefly undervalued wstETH relative to its market price. Because lending protocols rely on oracle data to determine collateral value, the lower price made some users’ positions appear riskier than they actually were.
Once those positions fell below the safety threshold, Aave’s liquidation engine automatically closed them. This triggered a chain reaction of liquidations across the platform, wiping out tens of millions in leveraged positions within hours.
Risk firm Chaos Labs later clarified that the core market oracle itself was accurate. Instead, the issue came from the CAPO risk oracle configuration, which limits how quickly yield-bearing assets can rise in value.
Chaos Labs explained that a mismatch in stored smart-contract parameters, including an outdated exchange rate reference and timestamp, caused the system to temporarily undervalue wstETH by about 2.85%.
The firm summarized the issue, saying a “misconfiguration on Aave’s CAPO oracle caused wstETH E-Mode liquidations,” adding that no bad debt was incurred by the protocol.
Despite the scale of the event, Aave itself did not suffer bad debt. Liquidators stepped in to close positions and earned about 499 ETH in liquidation incentives.
A Lido contributor confirmed that the problem was unrelated to the token itself, stating the liquidations were due to “an incorrect wstETH price reported by this oracle mechanism,” while emphasizing that the Lido protocol and wstETH continue to function normally.
Meanwhile, Aave officially confirmed that there is no impact to the protocol and Chaos Labs as of now, and the affected users will be fully reimbursed.
Turning to the market sentiment around Aave, it remains fairly steady despite the liquidation event. As of now, Aave is trading near $109.75, showing only minor movement with a 0.47% dip in the past hour but still up about 1.41% over the last 24 hours.
Even the trading activity is strong, with around $339 million in daily volume, mostly coming from centralized exchanges.
Overall, the limited price impact suggests the market sees the incident as a technical glitch rather than a major risk to the protocol.
Aave’s CAPO oracle briefly undervalued wstETH, triggering automatic liquidations and a cascade of closed positions.
Yes, Aave confirmed that all users impacted by the oracle glitch will be fully reimbursed.
The incident caused minimal effect. Aave remains near $109.75 with stable trading and limited price volatility.
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