Aave (AAVE) has solidified its position among the top 40 crypto assets. The expansion of Ethereum (ETH) led to a recovery in lending. Aave is again attracting whales at levels not seen since 2022.
Aave activity is increasing thanks to this year’s bull market. As with other assets and protocols, Aave benefited from the inflow of stablecoins and the rise in ETH market prices.
The latest upward move for the crypto market has also helped Aave recover its value to levels not seen since the 2021 bull rally. Aave is more than holding on now $20 billion in liquidity, and after months of reconstruction has become the largest credit protocol. Aave is also considered one of the most undervalued protocols, with a market cap of $3.53 billion, just a fraction of its value in the credit vaults.
Over the course of 2024, Aave successfully replaced Maker’s settlement and became one of the top sources of returns. Even Donald Trump’s protocol, World freedom financialplanned to build an instance of Aave for his own share of liquidity.
Aave posted slow returns during this phase of the bull market as the protocol was cautious about contagion and vetted its collateral assets. Aave’s real expansion started in October, with more sustainably high lending volumes and collateral growth. USDC was the most borrowed asset, due to its many uses in returns or trading.
AAVE broke into the top 40 tokens
AAVE broke into the top 40 after growing 40% in the past week. The asset closely followed the trend among altcoins, which have been piling up for months. AAVE traded at $235.60, close to the pre-bear market 2022 range.
Aave (AAVE) was trading at a one-year high above $237. | Source: Coinmarketcap
The token traded around its annual peak, with the highest volumes in the year to date. Open interest in AAVE expanded to a three-year peak above $171 millionwith a 70% prevalence of long positions. The open interest is much smaller, even compared to meme tokens. AAVE is making returns after 900 days of accumulation and has yet to attract short-term traders.
Trading in AAVE is distributed across exchanges, eliminating concentrated pumps on Binance. This led to more gradual growth for the token until now, when the official altcoin market was announced.
From 2025, Aave will start unlocking its ecosystem reserve. Currently, AAVE tokens are over 81% unlocked and have overcome years of selling. The connections in 2025 will take place gradually and will focus on ecosystem incentives.
From this range, AAVE is expected to test the USD 400 level and then move above its peak levels above USD 629. In an extended bull cycle, AAVE is expected to match MKR’s past valuations with four-digit prices in the most bullish scenario.
Aave increases the liquidity of stablecoins
One of the key features of Aave is its interoperability with other DeFi protocols. Aave is gradually integrating other assets, including Ethena’s USDe.
The synthetic stablecoin is considered riskier, but has been released into Aave’s vaults. In two months, Aave rose from an experimental US$2 million to US$620 million. USDe can be used as collateral, making a total of $578 million liquidity in other assets, with a margin for overcollateralization.
AAVE reduced the supply of GHO, its native stablecoin, back below the 175 million limit. GHO’s current supply is back at 169 million tokens, currently postponing a buyback and burn of AAVE tokens.
Aave’s liquidity profile is also shifting. The share of Arbitrum Loans has increased to 20% of all volumes, with more influence from Avalanche and Optimism. Ethereum and Base remain the largest platforms for Aave.
On the whale trades front, Aave is also returning to levels not seen since 2022. AAVE saw a total of 587 whale transactions based on Santiment data. These monthly levels are the highest since March 2022, before Aave cut its liquidity in response to the shrinking crypto market.
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