JPMorgan: The KelpDAO incident caused DeFi TVL to evaporate $20 billion, with funds favoring USDT for risk avoidance

BlockBeats News, April 23 — According to The Block, JPMorgan analysts pointed out in a Wednesday report that ongoing DeFi exploit incidents and sluggish growth continue to limit institutional interest in the DeFi space. The report was authored by Managing Director Nikolaos Panigirtzoglou and his team. The analysts stated that recent major hacking events related to Kelp DAO have caused the total value locked (TVL) in DeFi to evaporate by approximately $20 billion within just a few days. The attack involved a cross-chain bridge vulnerability, where the attacker minted $292 million of uncollateralized rsETH tokens and used them as collateral in the Aave lending protocol to borrow real ETH, resulting in about $230 million in bad debt.

“The incident triggered fund outflows from liquidity pools that had no direct exposure to the attacked assets, indicating that DeFi’s interconnectedness could become a weakness in adverse events,” the analysts said. LayerZero and blockchain security researchers have linked the exploit to North Korea’s Lazarus group. Some stolen funds have been frozen, while the remaining funds are still being transferred between multiple wallets and routed through privacy protocols.

JPMorgan pointed out that the losses caused by hackers and vulnerabilities in the crypto industry this year are comparable to those expected by 2025. Although the industry has improved in smart contract auditing, cross-chain bridge security still faces challenges. Additionally, DeFi growth measured in ETH remains weak — the TVL trend in USD is similar to the overall crypto market, with rapid increases before 2021, declines in 2022, and slow recovery afterward; however, after adjusting for price movements and measured in ETH, the TVL has remained essentially flat. The analysts questioned whether DeFi can achieve the organic growth necessary to support broader institutional adoption.

The report also stated that recent exploit events have driven funds toward stablecoins, similar to traditional investors shifting to cash during uncertain times. USDT, with its deeper liquidity on centralized exchanges and more direct exit channels during on-chain stress periods, has become the preferred “safe haven” tool for DeFi participants, but this advantage has not yet been reflected in USDT’s market capitalization growth.