Aave crisis deepens – Capital rotation sees $2.4B flows into Sparklend

The Kelp DAO exploit, which saw over $293 million drained, affected major lending platforms such as Aave and Morpho. 

Aave was hit the hardest and exposed to over $200 million in bad debts. As a result, massive capital flowed out of the platform, while deposits plunged by over $17 billion. 

The broader DeFi sector was extensively affected, with Total Value Locked dropping to a 2-year low of $83 billion. Interestingly, the fallout from Aave and Kelp DAO has turned out to be a blessing in disguise for Sparklend. 

Spark inflows gain $2.4 billion amid Aave outflows

After AAVE faced massive outflows, market participants found refuge at Sparklend. As AMBCrypto reported, capital rotated toward Sparklend, which market participants perceived as safer because it remained unaffected by recent events. 

As a result, since the April 18 Kelp DAO incidents, protocol deposits have recorded a net inflow of $2.4 billion. These inflows mark approximately 15%-20% of Aave’s net redemption outflows. 

The increased deposits suggested a massive demand for the protocol’s services. In fact, USD inflows surged from near net outflows to a stable level above $300 million. 

At the same time, the protocol’s active loans skyrocketed, surging from $971 million before the incident to $1.7 billion, gaining nearly $800 million over the past four days. 

Such sustained inflows of funds signal rising confidence in the protocol, with most participants finding safety there. 

Institutions, individuals, and whales pile in

According to Defioasis, funds into Sparklend have flowed from both individual addresses, whales, and institutional investors.  

Defioasis observed that at least 20 individual addresses each deposited over $20 million into Spark since the 18th of April. 

On the institutional side, Spark PSM is the largest depositor in the protocol and one of the largest entities to have left AAVE. Spark PSM total deposits into the protocol rose to $837.3 million. 

Additionally, Mellow Finance redeemed all of its $180 million from AAVE and deposited it all into Spark, raising deposits to $206 million. Another DeFi protocol that left AAVE for Spark is Instadapp, which has seen its net inflows exceed $88 million. 

Finally, in addition to institutions, whales also successfully redeemed their Aave assets and relocated them to Spark. The Sparklend protocol experienced massive demand across all DeFi participants as demand for nested strategies and lending remained elevated. 

Despite the Aave crisis, market demand for these services has not slowed; only investors have shifted to perceived safer protocols. Therefore, if the Aave crisis persists and market confidence continues to weaken, Spark will experience even more inflows. 

Final Summary

• Spark recorded $2.4 billion in net inflows as capital rotated to safer protocols amid the Aave crisis.
• 20 individual addresses deposited $20 million, while whales and institutions saw net deposits exceed $1.4 billion.