Ethereum Whale Withdrawal from Aave May Influence Borrowing Rates and stETH Depeg Risks

Key Points

1. A whale, likely Justin Sun, withdrew $1.7B worth of ETH from Aave, tightening ETH liquidity and impacting DeFi leverage strategies.

2. The withdrawal led to a surge in borrowing rates, forcing leveraged users to unwind positions and sell stETH, causing a 0.3% depeg from ETH.

3. The stETH depeg was exacerbated by the 18-day staking withdrawal queue, prompting users to sell stETH on secondary markets.

4. The event revealed vulnerabilities in DeFi lending and leveraged staking strategies, particularly around liquidity and oracle systems.

5. Market data showed ETH rallied 8% to $3,593, while stETH surged 30.5%, but the depeg exposed systemic risks in DeFi.