Ethereum Lending Hits $28 Billion After Aave Proves DeFi’s Crisis Shield in Weekend Crash

Ethereums on-chain lending ecosystem has reached a new milestone, with active loans surpassing $28 billion as of January 2026.

Central to this growth is Aave, the leading Ethereum-based lending protocol, which controls approximately 70% of the networks active lending market.

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Aaves Automated Liquidations Prevent DeFi Contagion Amid Weekend Crash

Data on Token Terminal shows that the growth in active loans across Ethereum-based lending platforms achieved a tenfold increase from January 2023 lows.

Active loans across lending platforms on Ethereum. Source: Token Terminal on X

This milestone highlights Ethereums continued dominance in DeFi. It gives it a roughly tenfold advantage over competing networks such as Solana and Base.

The surge in lending activity, while a signal of DeFis expanding adoption, also raises questions about systemic risk.

In 2022, elevated loan volumes contributed to waves of liquidations that exacerbated broader market downturns. By Q3 2025, crypto lending had reached a record $73.6 billion. This represents a 38.5% quarter-over-quarter increase, and nearly tripling since the start of 2024.

According to Kobeissi analysts, this was driven largely by DeFi protocols benefiting from Bitcoin ETF approvals and a sector-wide recovery.

Crypto market leverage is through the roof:

Total crypto loans jumped +35% in Q3 2025, to a record $73.6 billion.

This surpasses the previous record of $69.4 billion set in Q4 2021.

While leverage in DeFi remains far below that in TradFi sectors—representing just 2.1% of the $3.5 trillion digital asset market, compared to 17% in real estate—its concentration in algorithmic lending platforms like Aave amplifies the potential for rapid, automated liquidations.

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Weekend Crash Highlights Aave‘s Role as DeFi’s Stabilizer Amid $2.2 Billion Liquidations

The late January 2026 weekend market crash tested this system under extreme stress. Bitcoin dropped sharply from around $84,000 to below $76,000 amid:

• Thin weekend liquidity
• Geopolitical tensions in the Middle East, and
• Pressure from the US government funding uncertainties.

Over $2.2 billion in leveraged positions were liquidated across centralized and decentralized exchanges in just 24 hours.

Aaves infrastructure played a crucial stabilizing role. The protocol processed over $140 million in automated collateral liquidations across multiple networks on January 31, 2026.

Yesterday was another significant stress test to Aaves +$50B onchain lending markets.

Aave Protocol liquidated over $140M collateral across multiple networks without any issues, fully automated demontrating (yet again) the market leader protocol resiliency.

Despite high Ethereum gas fees spiking above 400 gwei, which temporarily created “zombie positions” where undercollateralized loans hovered near liquidation thresholds but could not be profitably cleared immediately, Aave handled the surge without downtime or bad debt.

Aaves performance prevented what could have been a far more severe contagion across DeFi. Had the protocol failed, undercollateralized positions could have accumulated into bad debt. Such an outcome would trigger cascading liquidations and potential panic across the ecosystem.

Other protocols, including Compound, Morpho, and Spark, absorbed smaller liquidation volumes. However, they lacked the scale or automation to fully replace Aave.

Lending Protocols by Ranking. Source: DefiLlama

Even large ETH holders, like Trend Research, who deleveraged by selling hundreds of millions of dollars in ETH to repay Aave loans, relied on the protocols efficiency to mitigate further market stress.

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The weekend crash highlights both the opportunities and vulnerabilities inherent in Ethereums lending ecosystem.

While active loans and leverage are rising, Aave‘s resilience signals that DeFi’s infrastructure is maturing.

The protocols ability to absorb large-scale liquidations without systemic failures highlights Ethereum-based lending as a stabilizing force in volatile markets. It reinforces its “flight-to-quality” reputation among both institutional and retail participants.