The Kelp DAO Hack
The Daily Crypto Update for Institutional Investors
On Saturday, an exploit of Kelp DAO saw USD ~290M worth of rsETH stolen & subsequently used as collateral to borrow funds on DeFi lending venues, causing warped market dynamics across decentralized finance
What happened? rsETH is Kelp DAO’s liquid restaking token that represents staked ETH. It allows users to earn staking rewards while deploying the token across DeFi. Heading into the weekend, rsETH, which is widely integrated across the DeFi lending ecosystem as collateral, had a market cap of USD ~1.65B. Specifically, the hack targeted a Kelp DAO bridge, which is provided by LayerZero and used for transferring rsETH between Ethereum mainnet and over 20 other blockchains. The funds held on this bridge backed rsETh tokens across different blockchains. The ill-gotten rsETH, ~18% of the token’s supply, was then deposited across DeFi lending platforms, where the hackers borrowed uncompromised assets, leaving venues with bad debt. A range of DeFi venues began freezing rsETH related activity.
USD ~11.52B in crypto leaves DeFi lending: As news of the exploit emerged, users began a mass withdrawal of funds from a range of DeFi lending venues. According to DeFiLlama, Aave, the largest DeFi lending protocol, saw its total value locked (TVL) drop from USD 26.40B to 17.95B over the weekend. Overall, DeFi lending TVL dropped from USD 53.40B ahead of the exploit to 41.87B. On lending protocols, borrow rates are often the function of utilization, i.e. the proportion of deposited assets that are borrowed. As users withdrew stablecoins from Aave, driving the utilization rate up, USDt and USDC borrow rates jumped up to ~14% from a prior ~3% and remain at these levels. Overall, users withdrew USDt ~1.7B and USDC 1.8B from Aave. With the two stablecoins utilization rates now 100%, meaning all deposited funds are borrowed, users are unable to withdraw these funds.
Unlike overall DeFi TVL, lending TVL reached a record high in 2025: Overall DeFi TVL, the measure of the value of crypto deployed in the sub-sector, reached a record high of USD ~177B in 2021. The metric reached a cycle-high of USD ~169B in October of last year. TVL related specifically to DeFi lending, on the other hand, has followed a different pattern. In October, DeFi lending TVL reached a record high of USD ~90B, according to DeFillama data. At the time, USD ~51B of loans were active. With crypto’s late 2025 unwind, DeFi lending TVL saw a substantial reduction while these markets continued to function normally throughout this downturn.
DeFi remains rife with security risks: Earlier this month, Solana-based decentralized perp venue Drift Protocol suffered a breach worth USD 286M. The breach was attributed to a ‘North Korean state-affiliated group also tracked as AppleJeus or Citrine Sleet.’ LayerZero has attributed the latest incident to ‘to a highly-sophisticated state actor, likely DPRK’s Lazarus Group…’ According to blockchain analytics and forensics firm Chainalysis, North Korean-linked hackers stole USD 2B worth of crypto in 2025. Thus far in 2026, crypto hacks in 2026 have reportedly resulted in losses of USD 771.8M.
CRYPTO HEADLINES
Strategy (NASDAQ: MSTR) added 34,164 BTC to its treasury last week for about USD 2.54B at an average price of USD 74,395 per coin. This represents Strategy’s 3rd largest BTC acquisition to-date. The company’s total holdings are now 815,061 BTC, purchased for USD ~61.56B. - link - @CoinDesk
Strategy (NASDAQ: MSTR) has proposed shifting its STRC preferred stock dividend from monthly to semi-monthly, pending shareholder approval on June 8, 2025. The change is described as having the goal of stabilizing price movements, flattening liquidity, and offering more frequent dividend opportunities, while maintaining the 11.5% annualized yield. - link - @BitcoinTreasuries
Polymarket is reportedly in talks to raise USD 400M at a USD 15B valuation, following a previous USD 600M investment from Intercontinental Exchange. The funding would place Polymarket below competitor Kalshi’s USD 22B valuation. Prediction markets have experienced increased trading volume and institutional interest, but face ongoing regulatory scrutiny in the US. - link - @Cointelegraph
Senior central bank officials have warned that the growing use of US dollar-denominated stablecoins could accelerate dollarisation in emerging markets, undermine currency control, and facilitate criminal activity. The Bank for International Settlements cited regulatory and financial integrity risks, while the IMF acknowledged both benefits and challenges. The opinions were raised last week as financial policymakers met in Washington for IMF and World Bank meetings. - link - @FT
US spot BTC ETFs reported USD 996.4M in weekly net inflows, the highest since mid-January. BlackRock’s IBIT attracted USD 906M, while Morgan Stanley’s MSBT saw USD 71M in its first full trading week. Spot Ethereum ETFs posted USD 275.8M in inflows. - link - @TheBlock
Vercel disclosed a security breach traced to a compromised Context.ai tool, prompting crypto teams to rotate API keys and scrutinize code for potential exposure. The hack could have potentially impacted a variety of crypto projects although no specific digital asset breaches have been reported as a result. Vercel is investigating alongside law enforcement. - link - @CoinDesk
Coinbase (NASDAQ: COIN) has launched a service in the UK enabling users to borrow up to USD 5M in USDC using BTC, ETH, or cbETH as collateral on Morpho. The launch of the product in the UK follows Coinbase’s US introduction of on-chain crypto-backed loans via Morpho in January 2025 - link - @TheBlock
TOP ARTICLES
Bloomberg: Permissionless Becomes a Policy Problem as Crypto Goes Mainstream
Barron’s: Bitcoin Price Falls. Why Peace Talks Are Cryptos’ Next Big Signal.
OPEN-SOURCE RESEARCH / LONG-READ OF THE DAY
Wall Street won’t buy ‘trustless’ security promises, Gracy Chen for CoinDesk, April 15, 2026
Gracy Chen, the CEO of Bitget, shares her view on institutional adoption of crypto.
CRYPTO MULTIMEDIA
Inside Binance’s Plan to Become a Global Financial Super App, The Crypto Beat Podcast, April 17, 2026
Richard Teng, Co-CEO of Binance, discusses ongoing crypto market dynamics and Binance’s future plans.
CHART OF THE DAY
USDt and USDC rates on Aave have spiked after months of relatively depressed costs to borrow stablecoins as a result of the Kelp DAO incident.
About FRNT Financial
FRNT is a digital asset investment bank offering capital markets and advisory services to institutional investors participating in or entering the space. The Company aims to bridge the worlds of traditional and web-based finances with a technology forward and compliant operation. Business lines include deliverable trading services, structured derivative products, merchant banking, advisory, consulting, lending origination and principal investments. Headquartered in Toronto, FRNT was co-founded in 2018 by CEO Stéphane Ouellette.