Spark Protocol was one of the winners in a large-scale reshuffling of DeFi liquidity. The protocol drew in $1.3B of funds flowing out of Aave.
Spark Protocol, a sub-DAO of Sky Protocol, attracted $1.3B in additional liquidity for the past week. The protocol now carries over $5B in total value locked, and may expand further as DeFi funds are getting allocated to new liquidity venues.
The inflows of Spark Protocol arrived after Aave lost over $15B of its liquidity. The outflows were a disproportionate response to the KelpDAO hack. Following several days of withdrawals, Aave now holds $15.15B in total value, down from $25B in early April.
DeFi liquidity as a whole is down to levels not seen since early 2024 at $85B. The sector lost $7B in the past week in secondary outflows following the major hack. Despite this, DeFi remains at a relatively high baseline level and may recover if traders move to other protocols.Â
Spark Protocol’s token rises to 2026 peak
Spark Protocol’s SPK tokens rallied to a yearly high, rising by 80% in 24 hours. SPK got a boost from a recent Upbit listing. The asset already relies on the Korean won for 17.7% of its daily trading volumes.
Trading volumes also reached a one-year peak above $652M after months of stagnation. Sky Protocol has not seen a similar inflow, instead showing TVL shrinking from $7.46B in late March down to $5.41B in April.
SPK retained the advantage of being traded on Binance and Coinbase, finally reviving its attention. In the past 24 hours, DeFi tokens as a whole showed a minimal net change, with the SPK rally offsetting the drop of AAVE partially.Â
In total, DeFi tokens are valued at over $54B, making up 19.2% of the Ethereum market capitalization. DeFi is down from over 30% of the Ethereum market cap during more bullish periods.Â
Will DeFi show resilience?
Following the KelpDAO hack, the exploiters managed to swap nearly 75,700 ETH from the hacker’s most active address. Most of the funds flowed into BTC and left the DeFi space entirely. Previous hacks have retained ETH or stablecoins for trading within the ecosystem.Â
The hack, which led to a $293M loss, had much wider side effects in terms of liquidity. The final estimate for Aave bad loans was around $177M, much smaller than the outflow of liquidity.
However, the available liquidity has not abandoned the space and is now being reassigned. DeFi liquidity is composable, and may begin to boost total value locked as traders return to the safest vaults.
ETH still trades above $2,350, as whale buying has absorbed the selling from the hack. While some vaults were affected, DeFi showed its approach is partially decentralized, not causing a real failure of entire protocols as during the 2022 bull cycle.
