The recent significant withdrawal of USDT liquidity from the Aave protocol has posed challenges for other lenders. This was reported by DeFi analysts.
Overview of Aave's Liquidity Situation
A major market participant known as HTX has removed up to 93% of USDT liquidity from one of the largest lending pools on Aave. This has constrained the ability of other participants to withdraw their stakes, as most USDT is already claimed by borrowers.
Impact on Borrowing and Deposit Rates
Following the liquidity withdrawal, the borrowing rate on Aave reached 28.6%, while deposit rates peaked at 24.65% annualized. These rates quickly normalized back to 8% within an hour.
Aave's Response to Liquidity Withdrawal
Despite the temporary difficulties, Aave managed to attract new deposits from other participants. The protocol demonstrated its resilience, maintaining $1.2 billion in liquidity.
The liquidity withdrawal from Aave proved to be a significant stress test for the protocol, showcasing its resilience and the self-correcting nature of its pools.
