Aave (AAVE), the decentralized finance (DeFi) protocol, has firmly established its position among the top 40 crypto assets, experiencing a surge in lending due to the expansive growth in Ethereum (ETH). In a remarkable turn of events, Aave is once again drawing the attention of whales, with activity levels that have not been witnessed since 2022.
The current bull market has witnessed an intensified activity in Aave, mirroring the trend in other digital assets and protocols. The inflow of stablecoins and the escalating market prices of ETH have significantly contributed to Aave’s success. The recent upward trajectory in the cryptocurrency market has also played a part in Aave’s recovery, bringing its value locked to a level that hasn’t been seen since the bull rally of 2021.
Aave is currently locking in more than $20B in liquidity, making it the largest lending protocol after several months of rebuilding. With a market capitalization of $3.53B, Aave is considered one of the most undervalued protocols, given that its market cap is only a fraction of the value held in its lending vaults.
Throughout 2024, Aave managed to replace the unwinding of Maker, becoming a crucial source of yield. Even Donald Trump’s protocol, World Liberty Financial, has plans to build an Aave instance to capture its share of liquidity.
Aave’s comeback during the recent phase of the bull market was slow yet calculated, as the protocol cautiously vetted its collateral assets to avoid potential contagion. Sustained high borrow volumes and an increase in collaterals marked the real expansion of Aave, beginning in October. The USDC emerged as the most borrowed asset owing to its versatility in yield or trading applications.
AAVE’s 40% growth in the past week propelled it into the top 40 tokens, closely following the trend among altcoins which have been accumulating for months. AAVE traded at $235.60, very close to its 2022 range before the bear market.
Trading for AAVE has been distributed among different exchanges, avoiding concentrated pumps on Binance. This strategy has led to a more gradual growth for the token, which is expected to continue with the announcement of the official altcoin market.
Moving forward into 2025, Aave is set to start unlocking its ecosystem reserve. At present, over 81% of AAVE tokens are unlocked, surpassing years of selling. The 2025 unlocks will be gradual, and will be used for ecosystem incentives.
With this momentum, AAVE is projected to test the $400 level, and then break past its peak levels over $629. If the bull cycle continues, AAVE could potentially rival the former valuations of MKR with four-digit prices in the most bullish scenario.
Aave is also making strides in growing its stablecoin liquidity, thanks to its collaborations with other DeFi protocols. One such partnership is with Ethena’s USDe, a synthetic stablecoin. Despite being considered riskier, the USDe has been introduced into Aave vaults. Within two months, the volume of USDe in Aave vaults ballooned from an experimental 2M to 620M.
According to Santiment data, Aave is witnessing a resurgence in whale transactions at levels not seen since 2022. A total of 587 whale transactions were recorded, reaching the highest monthly levels since March 2022, before Aave reduced its liquidity in response to the contracting crypto market. This activity underscores Aave’s resilience and potential for growth in the ever-evolving crypto landscape.
