Digital asset whales have withdrawn $1.7 billion worth of Ethereum (ETH) from Aave in the last seven days. The decentralized finance (DeFi) lending protocol saw heavy outflows, leading to low liquidity and a higher borrowing rate. Crypto whales dominate general market sentiments, and their activities create a ripple effect on the wider market.
Few Whale Activities Jolted The Platform
According to DeFiLlama data, Aave holds over $55 billion in deposits, making it the largest DeFi lending protocol on Ethereum. As a result, the platform has large amounts of institutional and big-asset client entities. Crypto analysts point to Justin Sun as the major whale behind the consistent ETH outflows.
On-chain data indicate that wallets linked to the Tron executive have withdrawn $646 million over the last three days. Furthermore, a wallet linked to the crypto exchange HTX withdrew $455 million worth of ETH during the same time frame. Sun also served as an advisor to HTX, raising initial concerns regarding the huge transfers. However, wallets linked to the crypto executive still hold about $80 million worth of ETH on Aave.
Other whales and entities also recorded outflows in the mix. Abraxas Capital withdrew approximately $115 million over the week, further lowering liquidity. The impact was far-reaching on the platform activities, as low liquidity means higher interest rates on Aave. As a result of the 10% jump in rates, looping strategies were at risk. This eventually led to increased outflows dampening sentiments.
However, some lenders profited from their ETH on the platform as rates spiked. At the moment, it might take the network about 11 days to unstake a backlog of 627,944 Ethereum.
 
Although Aave recorded outflows, DeFi protocols have marked inflows this year, soaring to new levels. This is linked to upscale institutional investors from traditional finance and the general market performance. As Bitcoin soars to multiple all-time highs, DeFi protocols see increased activity and stablecoin inflows to gain yield and exposure.
Neli Zaltsman, the head of Blockchain Payments at JPMorgan, stated that the correlation between DeFi and Tradfi becomes closer as institutional interest dominates crypto assets. “Our goal has always been to find the best way to work with the public blockchain, regulatory environment permitting,” she added.
Source: https://zycrypto.com/justin-sun-whales-withdraw-1-7-billion-eth-from-aave-whats-going-on/
