Aave bounces from monthly lows on demand for DeFi returns

Aave (AAVE) bucked the market trend and achieved a two-day rising streak. AAVE pushed up from two-month lows, supported by rising demand for DeFi returns. 

Based on recent technical predictions, AAVE broke out, returning easily to the $85 price range. AAVE is now an asset in focus, as it turned into one of the most visited DeFi apps with the highest revenues. 

Read: Aave price prediction 2024-2030: Is AAVE a good investment?

The lending protocol is among the unicorns that have rebuilt over multiple bull cycles, finding new sources of liquidity and better securing against liquidations. Currently, AAVE is using Ethereum’s relative stability to launch additional opportunities for passive income through crypto lending.

After a two-day rapid rally, AAVE traded at $91.05. The asset has yet to recover its levels since the June 7 sell-off but has re-sparked bullish attitudes. AAVE also benefits from the recovery of Ethereum (ETH), which kept above $3,300 even after the most recent market sell-off.

AAVE broke out rapidly from its lows under $80 in a rally extending for two consecutive days. Source: Coinmarketcap

Trading AAVE is seen as a significant risk, due to the asset’s volatility. The AAVE token was extremely sensitive to market fluctuations tied to the protocol’s overall value locked. However, AAVE continued to innovate and rebuild its DeFi tools, turning into one of the unicorn companies in the current bull cycle. 

The price rally for AAVE arrives after another rapid growth cycle, which expanded its TVL to more than $12B. The protocol also drew an additional 125 ETH through its Merit wETH program, though the inflows came from a handful of whales, rather than small-scale users.

AAVE continues to post robust monthly earnings

The biggest attractive factor for AAVE is its annual revenues of more than $70M, on relatively low expenses. AAVE is also a “fat fee” app that is growing its revenues with more users. 

AAVE earned 5.73M in June alone, with a growth of 25% month-on-month. For almost all previous months in 2024, AAVE also expanded its revenues from trading and transfer fees. 

AAVE is a close competitor to MakerDAO, surpassing it in the past weeks. AAVE and MakerDAO are also closely competing in growing their stablecoin supply. GHO and DAI are among the fastest-growing stablecoins based on a DeFi protocol.

AAVE aggressively grows on new protocols

Recently, the AAVE community voted to grow by launching on ZKSync and Arbitrum. The AAVE protocol is also among the top 10 apps on the newly influential Base blockchain.

Also read: DeFi lending revenues peak despite subdued token prices

AAVE is the sixth largest app on Base, though still carrying only less than $60M in value. Yet the presence of AAVE is part of the drive to include more DeFi apps through Base and reach a wider user base through smart wallets. 

Additionally, AAVE is expanding through its GHO stablecoin, which is already deposited for yields on third-party DeFi services.

GHO, as a growing stablecoin, offers multiple opportunities for staking and arbitrage. GHO is created with excess collateral, making it more secure than fully algorithmic coins. For now, GHO pools and yield mechanisms are still building up their liquidity. 

GHO is being used in conjunction with the new trend of pairings between stablecoins. Instead of actively trading, users buy and stake different protocol coins, then leave the protocol builders to discover their own risk profile and provide yield. 

Crypto lending revived in Q2

Crypto lending remains risky and is prone to liquidity crunches and panic contagion, but protocols are trying to adapt and grow in Q2. Some of the stablecoins may not be readily liquid or capable of being immediately unstaked. 

AAVE benefitted from the growth of crypto lending, which was noticeable in Q2. The biggest share of loans is still with AAVE, set at around $7.4B. 

AAVE not only competes but also partners with Spark Protocol, Venus Protocol, Morpho, and Compound, especially in forming stablecoin pairs. 

AAVE’s approach is more conservative compared to Ethena’s. The supply of GHO stablecoins grew gradually, from around 32M in early 2024 to just under 90M in June.

Cryptopolitan reporting by Hristina Vasileva