Large Withdrawals from Aave Trigger Liquidity Shortage

In the past week, whales have withdrawn significant amounts of Ethereum from the lending protocol Aave, leading to increased funding rates and the abrupt closure of some positions.

On certain days, the APY on wETH positions exceeded 10%. In this scenario, liquidity providers benefited, while asset borrowers did not.

Traders engaged in looping—a strategy of earning profits from staking Ethereum through repeated deposits and borrowings—suddenly began losing money. They closed positions en masse, forcing liquid staking providers to abandon coin lock-ups.

This resulted in a massive withdrawal queue. As of July 23, 633,896 ETH were awaiting withdrawal—a record high.

This created a temporary liquidity shortage.

Currently, funding rates on Aave have returned to normal, but the situation highlighted the influence of major players.

Who Withdrew the Assets?

In a conversation with DLNews, Aave contributor Marc Zeller stated that he believes the main whale withdrawing funds from the protocol is TRON founder Justin Sun. According to his observations, the businessman regularly transfers and withdraws large sums.

According to the Arkham dashboard, wallets identified as belonging to Sun have withdrawn about $650 million in Ethereum from Aave in recent days. His addresses still hold stETH worth $390 million.

“[Sun] is just unpredictable. He trades billions like I go grocery shopping,” wrote Zeller in a Telegram chat discussion.

Addresses associated with the crypto exchange HTX also moved approximately $450 million worth of coins out of the protocol.

Additionally, the London-based investment firm Abraxas Capital Management withdrew over $100 million in cryptocurrency over the past week.

Back in the market’s rise, networks of Bitcoin and Ethereum saw a surge in whale activity. Large investors moved coins worth billions of dollars.