JPMorgan: KelpDAO Incident Leads to $20 Billion DeFi TVL Evaporation, Funds Inclined to Choose USDT for Safety

BlockBeats News, April 23rd - Morgan Stanley analysts stated in a report on Wednesday that the ongoing DeFi exploit events and sluggish growth are still hindering institutional interest in the DeFi sector. The report was led by Managing Director Nikolaos Panigirtzoglou. The analyst noted that a recent major hack related to Kelp DAO had evaporated around $20 billion in Total Value Locked (TVL) in just a few days. The attack involved a cross-chain bridge vulnerability, where the attacker minted $292 million worth of uncollateralized rsETH tokens and used them as collateral in the Aave lending protocol to borrow real ETH, resulting in approximately $230 million in defaults.

“The event triggered capital outflows from liquidity pools not directly exposed to the attacked assets, indicating that the interconnectedness of DeFi could become a weakness in adverse events,” the analyst said. LayerZero and blockchain security researchers have linked this exploit to the North Korean Lazarus group. Some of the stolen funds have been frozen, while the remaining funds are being moved between multiple wallets and routed through privacy protocol.

Morgan Stanley pointed out that the scale of losses in the crypto industry due to hacks and vulnerabilities this year is comparable to that of 2025. Despite improvements in smart contract audits, cross-chain bridge security remains a challenge. Furthermore, DeFi growth priced in ETH remains weak — the TVL trend in USD mirrors the overall crypto market, with a rapid increase before 2021, a fall in 2022, and a slow recovery thereafter; but after adjusting for price movements and pricing in ETH, the TVL remains relatively flat. The analyst questioned whether DeFi can achieve the organic growth needed to support broader institutional adoption.

The report also stated that recent exploit events have driven funds towards stablecoins, similar to traditional investors turning to cash in uncertain times. USDT, with its deeper liquidity on centralized exchanges and more direct off-ramp 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 cap growth.