Aave Oracle Glitch Causes $27 Million in Crypto Liquidations

TLDR

• A price oracle misconfiguration on Aave triggered roughly $27 million in liquidations on March 10, 2026.
• The glitch affected wstETH, a Lido staking token, causing it to be valued about 2.85% below its real market price.
• Around 34 user accounts had their positions unfairly liquidated as a result.
• Third-party liquidators made approximately 499 ETH in profits from the pricing error.
• Chaos Labs confirmed no bad debt was created and that all affected users will be fully reimbursed.

Decentralized lending platform Aave suffered an oracle misconfiguration on March 10, 2026, that caused around $27 million in liquidations across roughly 34 user accounts. The issue was tied to a technical error in how Aave priced wstETH, a token that represents staked ether issued by Lido.

Oracles are services that feed real-world price data into blockchain applications. Aave relies on them to track the value of collateral backing loans. When collateral falls below a required threshold, the protocol automatically liquidates the position.

The problem originated in Aave’s Correlated Asset Price Oracle, known as CAPO. This system is designed to prevent sudden price jumps by capping how fast the value of yield-bearing tokens can increase.

CAPO uses a snapshot ratio and a snapshot timestamp to calculate a maximum allowed exchange rate. In this case, those two values became misaligned.

Chaos Labs, Aave’s primary risk management provider, explained that an off-chain process tried to update the snapshot ratio to approximately 1.2282. However, an on-chain rule limits that ratio to only increase by 3% every three days.

Because the update could not be applied in a single transaction, the snapshot ratio and its associated timestamp fell out of sync. This caused CAPO to calculate a capped exchange rate of about 1.1939, well below the real market rate of around 1.228.

In practical terms, the protocol treated wstETH as roughly 2.85% less valuable than it actually was. That pushed certain borrowing positions below their required safety thresholds.

What Happened to Affected Users

Around 10,938 wstETH was liquidated across 34 accounts. Third-party liquidators — bots or traders that repay risky loans in exchange for discounted collateral — collected approximately 499 ETH in bonuses and profits.

Chaos Labs confirmed that Aave itself did not take on any bad debt from the event. Aave Labs founder and CEO Stani Kulechov posted on X that there was “no impact to the Aave Protocol.”

A Lido contributor told CoinDesk the issue had nothing to do with wstETH itself or the Lido protocol, which continued to operate normally throughout.

Compensation Plan

Chaos Labs responded quickly by reducing wstETH borrow caps and manually realigning the snapshot parameters to restore the correct oracle value.

A compensation plan is already underway. Chaos Labs said it recovered 141.5 ETH from the incident and will draw up to 345 ETH from the Aave DAO treasury to cover remaining losses for affected users.

The total trading volume of wstETH during the 24-hour period was just $10 million, suggesting few traders were able to exploit the pricing gap before it corrected.

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