Aave Price Back To $57, But Threat Of New Attack Looms Over It

The Ethereum-based decentralized finance (DeFi) protocol Aave suffered an attack led by Avraham Eisenberg. The controversial individual was behind a sophisticated run against Mango Markets. The run has been called an attack by some and a clever strategy by others. 

Aave (AAVE) trades at $57 with a 7% and 36% loss in the last 24 hours and the previous week, respectively. Curve Finance’s native token CRV was also part of the attack. This token has seen significant selling pressure in the short term but has been trending to the upside over today’s trading session. 

Orchestrating An Attack On Aave, First Attempt?

Rudy Kadoch, founder of the portfolio management project Nested, summarized yesterday’s event and the “Bad Debt” attack on Aave. According to this report, Eisenberg borrowed $83 million of CRV and used $50 million of stablecoin USDC as collateral on the decentralized finance platform. 

Eisenberg published the thesis that supported this strategy in October 2022 via his Twitter account. It was public, and his objectives were perfectly outlined: to leverage his initial capital to influence the price of an illiquid token, such as CRV or Ravencoin (RVN), in hopes of creating “bad debt,” an excess liability assumed by the protocol. 

Check out recent activity in the @CurveFinance $CRV pools on @AaveAave V2!

Over the past couple of days, the $CRV pools on Aave have seen a significant increase in both borrow rate and volume, likely to go short on $CRV. 👇 pic.twitter.com/Hx5Bt42Ks6

— Messari (@MessariCrypto) November 22, 2022 

To pay off this debt, Aave would trigger an auction mechanism that involves selling AAVE on the spot market. By taking a short position on this token, Eisenberg would benefit. 

I’ve been advised aave is perfectly safe so here’s the potential trading strategy. Not financial or legal advice, but if you do make 9 figures on this feel free to send a tip

Note that starting with more initial capital increases success odds and profit percentage pic.twitter.com/HKAF7Y5ogM

— Avraham Eisenberg (@avi_eisen) October 19, 2022 

By prompting the price of the underlying collateral, the Aave borrower can double or increase its price by five-fold “at least.” This attack was unsuccessful, as Kadoch noted, due to a lack of capital. The actor was trying to liquidate a CRV whale to create a bad debt. 

However, as…