TLDR
- As a decentralized platform for lending, Aave has hit an unprecedented milestone with roughly 40,000 active borrowers participating every week.
- The surge is largely due to the introduction of fresh lending avenues on Layer-2 blockchains like Base and Scroll.
- Aave's total value locked, or TVL, is up 70% this year, landing at $11.85 billion, positioning it as the third-largest within the DeFi landscape.
- The platform faced a wave of liquidations in August, with its Aave V3 variant seeing liquidation volumes reach $285 million.
- On August 15, Aave's token, AAVE, saw its price rise by 9% to trade at $106.4, although this is still 84% lower than its historical peak price.
Aave, renowned as the foremost decentralized finance (DeFi) liquidity hub, shows a complex mix of growth dynamics, juxtaposed against challenges, as the larger sector begins its comeback. Data indicates an upsurge in both user activities and token values, though substantial liquidations remain evident.
On August 14, Stani Kulechov, the mastermind behind Aave, announced a fresh zenith of 40,000 weekly active borrowers for the first time, eclipsing the previous record set in late 2022. The depositor count is also nearing its historical high.
Driving the increase in Aave's usership are new lending markets springing up on Layer-2 blockchain systems. The Base network, a fledgling Layer-2 solution, now constitutes close to 30% of Aave V3's unique wallet presence. Arbitrum and Polygon are not far behind, with wallet shares of 23.4% and 21%, respectively.
Aave's upward trajectory is reflected in the broader revival trend in the DeFi world. The platform’s TVL has climbed by 70% year-to-date, current figures indicating $11.85 billion.
This recent metric places Aave among the top three DeFi entities based on TVL size. according to data from DeFiLlama. Nonetheless, it's notable that this value remains a shadow of its all-time high near $20 billion back in October 2021.
AAVE, the intrinsic token of the platform, registered gains on August 15 with a notable 9% upturn, performing on par with top market gainers of the day, trading at $106.4. The daily trade volume for AAVE soared by 78% to reach around $262 million. This elevated Aave’s market cap to a formidable $1.57 billion, ranking it 54th globally among cryptocurrencies.
Challenges
Despite these favorable signs, Aave, along with other Ethereum-centric lending platforms, grappled with difficulties in August. Liquidations soared across the DeFi spectrum, totaling $431 million with Aave V3 responsible for $285 million of that sum.
The spree of liquidations is closely tied to market instability stirred by worldwide economic conditions. The end of July saw Japan's central bank raising interest rates, which led the yen to gain strongly against principal currencies, causing a descent in the cryptocurrency sphere. Ethereum, a keystone in DeFi protocols, lost nearly 40% of its worth within a mere 10 days.
These market fluctuations placed collateral in Ethereum-focused lending models, Aave included, in a volatile state. The platform was marked by increased volatility, as investors reacted with token inflows and USD withdrawals. IntoTheBlock, a source of on-chain market insights, pointed out that most liquidations on Aave were tied to stablecoin loans leveraged against (wst)ETH collateral as Ethereum's value contracted.
Yet, it isn't entirely bleak for Aave. The same liquidation processes that led to user losses resulted in $6 million profits for the Aave DAO, illustrating the intricate nature of DeFi markets.
Looking forward, Aave's market behavior indicates prospects for further upward momentum. The token is presently oscillating in a spectrum between $132.29 and $70.76 on a day-to-day basis.
Bouncing from the $76 support, AAVE has jumped back above the critical $100 level. A pivotal point remains the resistance at $106.92, which might instigate a breakthrough towards the $132.29 target area or a potential dip to the lower range threshold.
