Aave Investigates $50M Loss Incident: Caused by Low Liquidity, Not Slippage

Aave publishes post-event analysis of Swap incident: “On March 12, 2026, a user executed a token swap via the CoW Swap router integrated into Aave’s interface. The user attempted to exchange 50,432,688 aEthUSDT (valued at approximately $50.43 million) for aEthAAVE. Due to the unusually large size of the user’s order in a market with insufficient liquidity, CoW Swap provided an extremely unfavorable quote, which the user confirmed and accepted. It is important to note that the Aave protocol itself was never at risk, as this swap occurred outside the protocol via the aforementioned third-party swap service. To date, the relevant user has not contacted the Aave team. The core issue in this incident is insufficient liquidity, not slippage. Insufficient liquidity refers to the inability of a market to provide sufficient assets at a given price to fulfill a large order, resulting in severe price deviation. The user’s order far exceeded the available liquidity in the market, and the CoW Swap quote was already 99.9% below the expected market clearing price. The adverse outcome resulted from the user’s confirmation of the quote, not from price changes during execution. The root cause of this incident was routing a large trade through a market with insufficient liquidity, leading to extreme price impact. The user executed the trade after confirming clear warnings displayed in the interface. To prevent similar incidents, Aave Shield will be introduced in the Swap widget: it will by default block swaps with price impacts exceeding 25%.”