Aave has restored borrowing against wrapped Ether after temporarily freezing the asset as part of precautions tied to the Kelp DAO exploit. The protocol also lifted restrictions on related rsETH and wrsETH reserves, signaling that its recovery process is moving toward completion.
Aave founder Stani Kulechov said the loan-to-value ratios for WETH have been returned to pre-incident levels across the affected networks, including Aave V3 Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle and Linea. That means users can again use WETH as collateral for borrowing, including in collateral and debt swap transactions.
The freeze had been put in place as a safety response after the exploit, but a governance proposal approved on Saturday determined that the measure was no longer necessary. With the recovery advancing, the protocol judged that user protection could be maintained without keeping the restriction in place.
The move completes Phase II of the rsETH recovery plan. That phase included restoring rsETH backing with Ether that had been frozen after the incident, along with tokens donated by the DeFi United coalition, and reopening withdrawals.
The exploit occurred on April 18, when attackers believed to be linked to North Korean state-backed actors stole 116,500 Kelp DAO Restaked Ether tokens from Kelp DAO’s LayerZero-powered bridge. Those tokens were then used as collateral on Aave V3 to borrow wrapped Ether, creating about $195 million in bad debt for the protocol.
The attack had a sharp impact on Aave’s liquidity. According to DefiLlama, total value locked fell by more than $8 billion after the incident. Aave’s TVL now stands near $14.8 billion, down from about $23.5 billion in March.
Data analyst Tom Wan said deposits of wrapped stETH and wrapped Ether have declined since the exploit. Even so, available Ether liquidity has increased, and borrowing rates have eased to 1.9%, a level that could support the return of leveraged Ether yield strategies. He added that if loop demand recovers, some capital may move back into those trades rather than remaining on the sidelines or shifting to other lending venues.
Kelp DAO is also tightening its own network support. The protocol said it will discontinue rsETH bridging on several networks after June 15, including Optimism, HyperEVM, Unichain, Avalanche and MegaETH. After that date, recovering funds will cost 100 USDC per address. EUR/USD continued to weaken for a sixth straight session on Monday, trading near 1.1620 in Asian hours as the US Dollar advanced. The move reflected a firmer Federal Reserve policy tone, with officials signaling that inflation remains the central concern and that additional rate increases may still be required if price pressures do not ease.
Market expectations have shifted notably in recent days. The probability of a December rate hike has climbed to nearly 48%, up sharply from 14% a week earlier, according to the CME FedWatch tool. That repricing has lent broad support to the dollar and kept pressure on the EURO .
The greenback has also benefited from a stronger safe-haven bid amid persistent geopolitical tensions. The US and Iran have yet to reach an agreement to end weeks of conflict and reopen the Strait of Hormuz, a vital passage for global energy shipments. Rising oil prices have added to concerns about inflation and economic stress, particularly for countries dependent on imported energy.
Further unease has come from warnings linked to Taiwan, with tensions between the US and China remaining elevated. Those developments have encouraged investors to favor lower-risk assets, adding another layer of support to the dollar.
Even so, losses in EUR/USD may be limited by expectations that the European Central Bank will maintain a restrictive stance. ECB officials have recently signaled that policy may need to stay tight, or even tighten further, to prevent inflation from becoming entrenched.
A Reuters survey showed that 85% of economists now expect the ECB to raise its deposit rate by 25 basis points to 2.25% in June. That marks a notable increase from the share of economists expecting such a move before the April meeting, suggesting that the EURO could retain some support if the ECB delivers on those expectations.
