Aave and Lido lose $1.7B in massive DeFi capital drop after the Binance hack
Aave and Lido lost approximately $1.7 billion in total value locked following a $6.34 billion Binance hack that strained decentralized lending markets.
The cryptocurrency market faced significant disruption following Binance's $6.34 billion security breach on October 29, 2026. The hack occurred as stablecoin market capitalization was already experiencing a contraction of over $10 billion, with DeFiLlama reporting a decline from $308.8 billion on October 4 to $293.8 billion by November 3.
During the incident, an exploiter-linked wallet supplied 60 million USDT to the Aave lending protocol and borrowed 19,762 units of Wrapped Ethereum (WETH), worth approximately $44.6 million at the time. LlamaRisk assessed this position as overcollateralized and not posing a risk to suppliers, though the event triggered immediate response measures.
Emergency Measures
In response to the security breach, Aave's guardians froze 175 V3 reserves and 117 V4 reserves, blocking new supply and borrowing while allowing repayments, withdrawals, and liquidations to continue. This freeze prevented further exploitation but pushed some large reserves to 92%-100% utilization, causing borrowing costs to rise.
Withdrawals pushed some large reserves to 92%-100% utilization, meaning almost all supplied funds were borrowed. Borrowing costs rose, and stewards temporarily reduced the upper part of the interest-rate curves.
Market Impact
Among major DeFi protocols, Aave recorded the largest dollar decline in total value locked, losing approximately $1 billion between October 27 and November 3. Lido followed with a $713 million decline. USDT and USDC accounted for about $8.4 billion of the 30-day market-cap decline, highlighting the concentrated impact on stablecoin markets.
Affected reserves had reopened by October 31, with LlamaRisk reporting the restoration of specified non-stablecoin collateral settings and return to pre-incident rate curves by November 1. However, USDT, USDC, and USDT0 maintained zero collateral borrowing power in affected configurations, indicating lingering concerns about protocol security.
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