Aave Faces $1.7B Liquidity Drain as Justin Sun Pulls Out

Aave’s Liquidity Shrinks Fast

Aave is running low on Ethereum. The biggest reason? Justin Sun. Marc Zeller, a contributor on Aave, pointed out Sun’s large, sudden withdrawals as the main cause. In just one week, wallets linked to Sun on Arkham took out over $646 million worth of Ether. At the same time, HTX, where Sun is an advisor, withdrew another $455 million.

Other players joined the exit. Abraxas Capital took out $115 million. That brings the total to more than $1.7 billion leaving Aave in a short time. This drained liquidity forced Aave to raise borrowing rates above 10%. The platform didn’t have time to prepare. Contributors were left scrambling.

Zeller tried to ask Sun to give a heads-up. “He did it once,” Zeller said in a Telegram chat. “He’s just unpredictable.” That unpredictability is now hurting the system.

Aave is the biggest lending platform on Ethereum. It’s built to support large movements, but it still depends on liquidity providers. These LPs help keep everything balanced. When someone like Sun pulls out huge sums without notice, it disrupts the whole system. Rates go up. Users get hit. Trust takes a hit.

This wasn’t caused by panic. It was one person making big moves. That kind of control from one actor challenges the idea of DeFi. Decentralized systems should be strong and balanced. But this shows how fragile they can be when a whale acts alone and without warning.

Source: X

Ethereum Withdrawals Add More Pressure

At the same time Aave is facing stress, Ethereum’s staking system is under pressure too. The validator exit queue has surged. Right now, over 625,000 ETH is waiting to exit. That’s about $2.3 billion. The number hasn’t been this high since 2023.

Stakers want to lock in profits. ETH has jumped 150% since April. It’s a good time to take gains. But this also causes delays. It now takes up to 10 days to exit staking. Meanwhile, new validators are waiting to enter, with 359,500 ETH stuck in line.

This isn’t fear. It's a strategy. People are repositioning. But the effects pile up. Aave’s liquidity is falling. Ethereum’s staking system is clogged. The DeFi system is being tested on both ends.

While big players are exiting lending platforms, institutions are entering staking. The U.S. SEC gave more clarity in May. It said staking is not a securities offering. That gave confidence to big investors.

Source: X

BlackRock has included ETH staking in its products. Other companies are following. SharpLink Gaming and BitMine Immersion are using ETH-based yield strategies to grow returns. It’s not just about price anymore. It’s about clear rules and stable yields.

Right now, a record 36.39 million ETH is staked. That’s nearly 30% of all ETH in circulation. The data comes from Dune Analytics. The message is clear. Institutions trust staking. Even when lending platforms face trouble, staking looks strong and steady.

This isn’t a collapse. It’s a warning. Aave is still running. Ethereum is still growing. But both are under stress from fast, unexpected changes. One whale can shake the system. One profit rush can clog the network.

DeFi was built for freedom. For open access. But open systems need balance. They need signals. They need coordination. Right now, that balance is being tested.

Justin Sun’s withdrawals didn’t break Aave. But they revealed a weakness. Ethereum’s validator exits didn’t shut down staking. But they showed the limits.

The crypto space continues to grow. The tools are better. The rules are clearer. But moments like this remind everyone—resilience takes more than tech. It takes trust. It takes coordination. And it takes learning from every stress test.