Aave Leads DeFi Rescue Plan

Welcome back to The Warmup.

Happy Friday to all the stock market investors hearing about cryptocurrency.

Here’s what we’re watching:

• Market Snapshot

• Aave Leads DeFi Rescue Plan

• BTC Pullback Setup

• Soldier Arrested for $400K Polymarket Bet

Market: BTC steady, ETH slightly weak, and SOL showing strength while stocks remain firm and gold stays elevated.

Aave Leads DeFi Rescue Plan

What’s going on:

The KelpDAO exploit has turned into one of DeFi’s biggest collective action problems this year.

The attacker minted 116,500 unbacked rsETH, deposited nearly 90,000 of it into Aave as collateral, and borrowed around $190M in ETH and other assets before the protocol could freeze markets.

That left a massive hole, with the total rsETH shortfall now estimated at more than 112,000 rsETH.

As panic spread, Aave’s total value locked dropped by $10 billion in just a few days as users feared bad debt would hit the protocol.

What it means:

Now Aave is leading a recovery effort called “DeFi United” to restore rsETH backing and stop that bad debt from spreading across the ecosystem.

Lido, EtherFi, Ethena, LayerZero, Mantle, Tydro, and the Ink Foundation have all stepped in with commitments, while Aave founder Stani Kulechov personally pledged 5,000 ETH.

This is bigger than just one exploit. If rsETH collapses, the damage could spread across multiple major DeFi protocols, with Aave taking the biggest hit.

“DeFi United” is basically the industry deciding it’s cheaper to work together than let the contagion spread.

If the recovery works, it could become a blueprint for how DeFi handles systemic risk in the future. If it fails, it will be a painful reminder that shared liquidity also means shared problems.

BTC Pullback Setup

What’s going on:

BTC is trading near the top of its rising channel around $78K, with most signals pointing to a healthy pullback.

There’s still room for one final push toward the 1D EMA200 at $82.6K, but the bigger move likely comes lower first.

Key levels we’re watching:

• Resistance: $78K–$80K

• EMA200: $82.6K

• Support: $68K–$70K

• Invalidation: Break below channel support

Directional Bias: Short-term bearish, long-term bullish

What we’re waiting for:

• Rejection near resistance

• Possible push into EMA200

• Buyer reaction at lower support

Soldier Arrested for $400K Polymarket Bet

What’s going on:

A U.S. Army Special Forces sergeant was arrested for allegedly using classified military intel to make over $400,000 on Polymarket.

Gannon Ken Van Dyke helped plan Operation Absolute Resolve, the January raid that captured Venezuelan President Nicolás Maduro.

Before the raid, he placed 13 bets worth $33,000 on markets tied to Maduro’s removal and U.S. military action in Venezuela.

When the operation happened, those bets paid out around $409,000. Prosecutors say he then moved most of the funds into a foreign crypto wallet and asked Polymarket to delete his account.

What it means:

Polymarket flagged the trades and referred the case to the DOJ.

This is the first major insider trading case tied to prediction markets in the U.S.

It shows event contracts are now being treated like traditional financial markets, and trading on private information can bring the same legal consequences.

• DOJ arrests US solider accused of using secret intel to make Polymarket bet on Nicolás Maduro's capture

• Jane Street asks court to dismiss Terraform Labs' insider trading lawsuit

• Lido proposes allocating up to $5.8M in staked ETH to back Kelp exploit shortfall

Short-term noise might shake things out, but the bigger picture still leans bullish as macro conditions and liquidity continue to improve.

The crowd is leaning heavily on the four-year cycle narrative, and if everyone agrees on the same outcome, it’s usually where the market does the opposite.

Structural demand, especially from players like Saylor and ETFs, creates a persistent bid that makes deep downside less likely than most expect.

If key resistance levels break, this could quickly shift from hesitation to acceleration and the real move might just be getting started.

— The Warmup Team

Always do your own research. This newsletter is supplemental material to help educate readers as they make their own decisions. Projects mentioned here are provided to give a potential early-mover advantage.