According to a new report published by US-based financial giant JPMorgan Chase, the cyberattack linked to KelpDAO caused a significant disruption in the decentralized finance (DeFi) ecosystem. Bank analysts stated that following the incident, the total value locked (TVL) on DeFi platforms decreased by approximately $20 billion in just a few days.
The report was authored by a team of analysts led by Nikolaos Panigirtzoglou. The analysts added that ongoing vulnerabilities and slow growth in the DeFi sector continue to limit institutional investor interest.
The attack reportedly stemmed from a security vulnerability in the cross-chain bridge. Through this vulnerability, attackers created approximately $292 million worth of rsETH tokens without collateral and used these tokens to borrow real ETH via Aave. This process resulted in approximately $230 million in uncollectible debt.
According to analysts, the impact of the incident was not limited to the assets directly targeted. “This event demonstrated that the highly interconnected nature of the DeFi ecosystem can become a vulnerability during times of stress,” they stated. LayerZero and security researchers have linked the attack to the North Korea-linked Lazarus Group. It was reported that some of the stolen funds have been frozen, while the remainder is still being transferred between different wallets.
JPMorgan noted that the total scale of hacks and security breaches in the crypto sector in 2026 is projected to be similar to 2025 levels. While progress has been made in smart contract oversight, significant risks, particularly in cross-chain bridge security, remain.
It was also added that DeFi growth remained weak when evaluated in terms of ETH. While the TVL in US dollars followed a trend parallel to the overall crypto market, with rapid growth before 2021, a decline in 2022, and a limited recovery afterwards, the price-adjusted ETH-based TVL remained flat.
The report also noted that the recent attacks have led to a significant shift in investor behavior. While traditional markets see a tendency towards cash during periods of uncertainty, a similar trend in DeFi has emerged as a move towards stablecoins.
In this context, Tether (USDT) has particularly stood out as a “safe haven” due to its deep liquidity on centralized exchanges and the possibility of faster exits during periods of stress. However, analysts added that this increased demand has not yet been significantly reflected in USDT’s total market capitalization.
*This is not investment advice.
