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$1 Billion Floods Back Into Crypto Funds, Snapping Five-Week $4B Bleed

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$1 Billion Floods Back Into Crypto Funds, Snapping Five-Week $4B Bleed


CoinShares reported $1 billion weekly turnaround, driven by Bitcoin buying and renewed investor appetite across major markets.

Investment products tied to digital assets recorded $1 billion in net inflows last week, reversing a five-week run of $4 billion in outflows. CoinShares said that no single macro event explains the change. Instead, previous price softness, technical breakdowns, and renewed buying activity among major Bitcoin holders appear to have supported the rebound.

Market participants have recently focused more on identifying buying opportunities than on scaling back their exposure.

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Global Crypto Funds Recover

According to the latest edition of CoinShares’ Digital Asset Fund Flows Weekly Report, weekly fund flows were dominated by Bitcoin, which brought in $881 million. At the same time, short Bitcoin products drew $3.7 million. Ethereum attracted $117 million, its strongest weekly performance since mid-January, although both assets remain in net outflows for the year.

Solana, on the other hand, posted $53.8 million for the week and $156 million year-to-date. Chainlink gained $3.4 million over the past week, while XRP and Sui added $1.9 million and $0.4 million, respectively. Multi-asset products were the only segment to see withdrawals, with $6 million exiting.

Regionally, sentiment was largely consistent. The United States led with $957 million in new investment. Canada, Germany, and Switzerland added $34.1 million, $31.7 million, and $28.4 million, respectively. Hong Kong recorded $6.8 million, while Brazil brought in $3.2 million.

Geopolitical Shock

Since the ETF flows last week, there has been a sharp deterioration in geopolitical conditions. On Monday, crypto markets remain largely range-bound amid escalating geopolitical tensions, particularly involving Iran. An initial US strike on Iran over the weekend pushed Bitcoin toward about $63,000 and Ethereum below $2,000 before prices pulled back into established trading ranges.

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Approximately $300 million of long positions were liquidated when the news broke, a significant but contained amount, which, according to QCP Capital, suggests positioning was already reduced in the days before the event. The firm noted that this could also mean that investors are treating Bitcoin less as a “weekend macro hedge” and considering alternatives such as tokenized gold, which trades 24/7 and has seen increased risk-off interest.

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Options markets showed a spike in very short-term volatility but otherwise reacted moderately, which indicates traders may have been relatively well positioned for possible volatility given warning signs during the prior week. QCP pointed to a similar event last June, when BTC dipped on geopolitical news but recovered and later rallied. Options flow data also revealed buyers of call contracts with expiration later in March, which is consistent with some participants gearing up for a rebound.

“Despite price action looking fairly constructive, we remain cautious as tensions and uncertainty continue to build. The conflict is still in its early stages, and it’s premature to conclude whether it will remain contained or evolve into a broader regional confrontation involving other Gulf states.”

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Crypto World

Aave’s TVL Falls $8B After $293M Kelp DAO Hack

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Aave’s TVL Falls $8B After $293M Kelp DAO Hack

Total value locked on decentralized lending protocol Aave dropped by nearly $8 billion over the weekend after hackers behind the $293 million Kelp DAO exploit borrowed funds on Aave, leaving roughly $195 million in “bad debt” on the protocol and triggering withdrawals.

Data from DeFiLlama shows that Aave’s TVL fell from about $26.4 billion to $18.6 billion by Sunday, losing the top spot as the largest DeFi protocol. 

Aave v3’s lending pools for USDt (USDT) and USDC (USDC) are now at 100% utilization, meaning that more than $5.1 billion worth of stablecoins cannot be withdrawn until new liquidity arrives or borrows are repaid. 

$2,540 is available to be withdrawn from the $2.87 billion USDT pool on Aave v3 at the time of writing. Source: Aave

Aave’s TVL fall shows how rapidly risk from a single security incident can spread throughout the broader, interconnected DeFi lending market, potentially leading to a severe liquidity crisis.

The incident began on Saturday when hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth about $293 million from Kelp DAO’s LayerZero-powered bridge and used them as collateral on Aave v3 to borrow wrapped Ether (wETH).

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Crypto analytics platform Lookonchain said the move created about $195 million in “bad debt” on Aave, which contributed to the Aave (AAVE) token tanking nearly 20% from $112 on Saturday at 6:00 pm UTC to $89.5 about 25 hours later. 

Lookonchain noted that some of the largest crypto whales to withdraw funds from Aave were the MEXC crypto exchange and Abraxas Capital at $431 million and $392 million, respectively.

Source: Grvt

Several crypto networks and protocols tied to rsETH or the LayerZero bridge have paused use of the bridge until the problem is resolved, including DeFi platform Curve Finance, stablecoin issuer Ethena and BitGo’s Wrapped Bitcoin (WBTC).

Aave has frozen several rsETH, wETH markets

Shortly after the Kelp DAO exploit, Aave said it froze the rsETH markets on both Aave v3 and v4 to prevent any suspicious borrowing and later stated that rsETH on Ethereum mainnet remains fully backed by underlying assets.

WETH reserves also remain frozen on Ethereum, Arbitrum, Base, Mantle and Linea, Aave said.

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This incident marks the first significant stress test of Aave’s “Umbrella” security model, which was introduced in June 2025 to provide automated protection against protocol bad debt while enabling users to earn rewards.

Related: Aave DAO backs V4 mainnet plan in near-unanimous vote

Earlier this month, the Bank of Canada found that Aave avoided bad debt in its v3 market by using overcollateralization, automated liquidations and other strategies that shifted risk to borrowers.

In comments to Cointelegraph, Aave defended its liquidation-based model, framing it as a core safety mechanism that protects lenders while limiting downside for borrowers.

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It comes as Aave parted ways with its longest-standing DeFi risk service provider, Chaos Labs, on April 6, following disagreements over the direction of Aave v4 and budget constraints.

Magazine: Are DeFi devs liable for the illegal activity of others on their platforms?