This week’s crypto market appeared largely directionless on the surface. Bitcoin and major altcoins did not see any sharp declines, but despite the relative calm in prices, concerns grew beneath the surface over a DeFi-driven “liquidity shock.”
The trigger was a major attack involving KelpDAO. A bridge vulnerability led to a loss of confidence in rsETH-related assets, while lending protocols such as Aave faced challenges around handling bad debt.
In DeFi, even assets that normally function as collateral can quickly lose buyers once confidence is shaken, making liquidations more difficult. This case can be seen as a clear example of such a liquidity shock coming to the surface.
At the same time, spot Bitcoin ETFs continued to attract inflows, suggesting that institutional demand remains resilient.
U.S. spot Bitcoin ETFs reportedly recorded net inflows for eight consecutive trading days, with total inflows reaching around $2 billion. In other words, this week’s market was shaped by spot ETF buying supporting BTC, while DeFi-related credit concerns and macro factors weighed on the upside for altcoins.
Going forward, whether liquidation processes around Aave stabilize will be a key focus in assessing the broader market’s risk appetite.
