Decentralized lending protocol Aave successfully processed $210 million in liquidations without incurring additional bad debt. The market downturn on Monday led to a sharp decline in crypto asset values, triggering a surge in liquidations. Data from Chaos Labs indicated that this marked the largest single-day liquidation total since August 5.
Periods of high volatility typically increase the risk of bad debt as liquidation queues grow. However, Aave managed to clear liquidations efficiently without accumulating further losses. Instead, the protocol reduced its existing bad debt by 2.7% as the value of affected assets declined. This outcome underscored the strength of Aave’s risk management systems.
Most of the liquidations occurred on the Ethereum Mainnet, demonstrating the protocol’s ability to manage collateralized positions effectively. According to the report, $96 million worth of WETH and $25 million of WBTC were liquidated.
Aave’s ability to withstand the market stress received widespread praise. Analysts, including Bitwise CIO Matt Hougan, highlighted its resilience under extreme conditions. The protocol’s efficiency in handling liquidations without setbacks reinforced confidence in its security measures and liquidation mechanisms.
On January 7, Aave confirmed its deployment on the Aptos testnet, marking its first non-EVM expansion. This move is part of a broader initiative to extend support to six additional networks, including Botanix Labs’ Spider Chain, Linea, Mantle, and Sonic. Aave is also proceeding with a $63 million expansion to Sonic following a positive governance vote.