TLDR
- Aave recorded about $27 million in liquidations within 24 hours after a wstETH oracle glitch.
- The CAPO risk oracle misconfiguration temporarily undervalued wstETH by around 2.85%.
- The core market oracle remained accurate during the liquidation event, according to Chaos Labs.
- Liquidators stepped in to close positions and earned about 499 ETH in incentives.
- Aave confirmed that the protocol incurred no bad debt and will reimburse affected users.
A sudden liquidation wave hit the DeFi lending platform Aave and erased about $27 million in positions within 24 hours. The event followed a temporary pricing mismatch involving wstETH, Lido’s liquid staking token, according to on-chain data and risk analysts. The protocol confirmed no bad debt occurred and stated that affected users will receive full reimbursement.
Aave Liquidations Triggered by CAPO Oracle Misconfiguration
The incident began when Aave’s risk-control oracle briefly undervalued wstETH compared to its market price. As a result, the lower reported price reduced collateral values for leveraged users. Consequently, several positions fell below required safety thresholds and triggered automatic liquidations.
Aave’s liquidation engine closed those positions once they breached maintenance levels. This action then sparked a chain reaction across the platform. Within hours, liquidators cleared tens of millions in leveraged positions.
Risk management firm Chaos Labs later addressed the issue in a public statement. The firm said the core market oracle functioned correctly during the event. Instead, it identified a misconfiguration in Aave’s CAPO risk oracle settings.
Chaos Labs explained that CAPO limits how quickly yield-bearing assets can rise in value. However, a mismatch in stored smart contract parameters caused the discrepancy. The system temporarily undervalued wstETH by about 2.85%.
The firm summarized the situation by stating, “a misconfiguration on Aave’s CAPO oracle caused wstETH E-Mode liquidations.” It also confirmed that the protocol did not incur bad debt. Therefore, liquidators absorbed the risk and executed the closures as designed.
Lido Clarifies wstETH Status as Market Holds Steady
A contributor from Lido addressed the incident and clarified the token’s status. The contributor stated that the liquidations resulted from “an incorrect wstETH price reported by this oracle mechanism.” The contributor also emphasized that the Lido protocol and wstETH continue to operate normally.
Aave issued its own confirmation following the event. The team stated that the protocol remains unaffected and fully operational. It also confirmed that Chaos Labs continues to review the configuration parameters.
Liquidators actively participated during the event and earned incentives for closing positions. On-chain data shows they collected about 499 ETH in rewards. These incentives followed the protocol’s predefined liquidation rules.
Market data indicates that Aave’s token price showed limited movement after the incident. At the time of reporting, Aave traded near $109.75. The token recorded a 0.47% dip in the past hour but maintained a 1.41% gain over 24 hours.
Trading volume also remained elevated during the period. Daily turnover reached roughly $339 million, with most activity occurring on centralized exchanges. The latest figures show that Aave continues to trade steadily following the liquidation event.
