MegaETH Incentives Live On Aave
Aave V3 MegaETH market launches incentives for USDm, with USDe deposits already exceeding $100 million.
Incentives are now live for USDm on the Aave V3 MegaETH market. The market supports both USDm and Ethena's USDe stablecoin, with USDe already seeing over $100 million in deposits. Users can supply USDe as collateral to borrow USDm, earning a promotional rate of about 3% APY.
Over 342 million USDm has been deposited into the market so far. Aave is also planning to increase USDe deposit caps to a target of $500 million on the market. MegaETH is a high-performance Ethereum-compatible chain launched in February 2026.
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Circle Pushes USDC Rate Hike On Aave
Circle Chief Economist Gordon Liao proposes raising the USDC interest rate slope on Aave v3 Ethereum Core from 10% to 40% to attract liquidity after the KelpDAO exploit.
Circle's Chief Economist Gordon Liao has published an Aave governance proposal to raise the interest rate slope on the USDC market on Aave v3 Ethereum Core from 10% to 40% initially, with a target of 50%. He believes that higher rates will attract new USDC liquidity providers in an effort to bring utilization back down. The proposal comes in response to the KelpDAO exploit, which has driven the USDC lending market on Aave to 100% utilization for the last four days, leaving lenders unable to withdraw their funds due to insufficient liquidity.
As the proposal notes, debt repayments are being immediately absorbed by a queued withdrawal backlog. The proposal faced community pushback as raising the rate slope can accelerate harm. Higher rates risk triggering liquidations for borrowers who are already trapped. Liquidity providers are reluctant to deposit due to the current uncertainty around a potential lender haircut.
Circle has also faced broader criticism for not offering to inject liquidity directly into its own asset pool as the issuer of USDC. Earlier this month, Circle failed to freeze USDC connected to the DPRK in the Drift Protocol exploit.
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Aave Freezes ETH And LST Markets
Aave disabled rsETH, WETH, and borrowing on all LST and LRT collateral types after the KelpDAO exploit, sending markets to 100% utilization.
As the secondary shock of KelpDAO's $290 million exploit rippled through DeFi, large depositors including Justin Sun and MEXC withdrew millions from Aave. To mitigate impact, Aave disabled rsETH markets on V3 and V4, disabled WETH markets across Ethereum, Arbitrum, Base, Mantle, and Linea, and disabled borrowing on all LST and LRT collateral types.
Unable to withdraw from the frozen markets, users swapped their collateral to adjacent markets, sending the ETH, USDC, and USDT markets to 100% utilization. The stablecoin supply rates also surged above 13%. When markets are at 100% utilization, lenders are unable to withdraw, and many were stuck paying elevated interest on debt with frozen collateral. Aave's TVL has fallen by $8.4 billion in the last 48 hours. Fluid launched an aWETH redemption protocol offering stranded lenders a ~2% exit to wstETH or weETH.
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Disclaimer: Content is for informational purposes only, not endorsement or investment advice. The accuracy of information is not guaranteed.