A $30 million loan on Aave, collateralized by 355,093 AAVE tokens, roughly 2.3% of the total supply, underwent cascading liquidations on February 5, 2026, as AAVE plunged 15% to $105.60. The Block. Four transactions seized $2 million in AAVE to cover $2 million in USDC debt, triggered when AAVE dipped to $103–$104, dropping the position’s health factor below 1. Aave data. The loan, active since 2024 with escalating borrowings up to $5M in 2025, maintained a 132% collateral ratio pre-liquidation.
The liquidations coincided with a severe crypto market downturn, with Bitcoin (BTC) dropping 13% to multi-month lows and Ethereum (ETH) shedding similar value, according to the Block price data. AAVE’s health factor hovered near 1, making it vulnerable to volatility. On-chain data shows $1.47M in AAVE seized in the largest tranche, with liquidators profiting from discounts. Speculation linked the borrower to Aave founder Stani Kulechov due to his recent $30M London mansion purchase, but he denied it on X, stating, “Not me. I stake my Aave,”
Aave’s missionless liquidation mechanism allows anyone to repay debt and seize collateral at a penalty discount, stabilizing the protocol but punishing borrowers. The position’s 132% ratio highlights DeFi’s sensitivity to rapid price swings, with $9.2B in AAVE TVL exposed. DefiLlama. Strategy’s $12.6B Q4 loss from BTC holdings underscores similar treasury risks. AAVE’s $105.60 price tests support at $100, with resistance at $120. TradingView.
Aave’s liquidation engine mitigated systemic risk by resolving the position efficiently, but cascading events signal DeFi vulnerabilities in bear markets. AAVE could rebound to $150 if BTC stabilizes above $112,000. Techopedia, bolstered by Layer 2 integrations and RWA feeds, .. Investors should monitor health factors on Aave.app and AAVE flows via CryptoQuant. Dollar-cost average with stop-losses below $100, or diversify into USDC. Follow @AaveAave on X for updates. While short-term pressure persists, Aave’s fundamentals support recovery in 2026.
