Aave V3 records $285 million worth of liquidation as Ethereum lending protocols stumble

Ethereum lending protocols have been under intense bearish pressure, causing massive liquidations from the decentralized finance (DeFi) protocols. August is so far the worst month for these lending protocols on the Ethereum mainnet, which have witnessed liquidations worth more than $430 million. Aave V3 alone recorded 285 million worth of liquidations.

August has proved to be a tough month for Ethereum-based lending protocols, according to data from Defillama. The month is only halfway through, but Ethereum lending protocols have already experienced $431 million worth of liquidations. 

Aave V3 alone has recorded the most liquidations, valued at $285 million. Aave is the largest crypto lending protocol by total value locked (TVL). Other lending protocols like Spark, Compound, and Morpho Blue also experienced significant liquidations.

Ethereum’s leading lending protocol, Aave, stumbles

At the end of July, the Bank of Japan hiked interest rates, causing the Japanese yen to gain strength sharply against the US dollar and other major currencies. The policy caused a sharp market imbalance, triggering the worst crypto decline in 2024. Ethereum shed almost 40% in less than 10 days and was among the most affected digital assets. 

Collateral in Ethereum’s lending protocols also saw liquidations. Protocols like Aave V3 witnessed increased volatility since investors executed token inflows and USD outflows on the platform’s application. The volatility levels on the protocol peaked to outperform levels recorded in 2022.

Aave witnessed its largest-ever liquidations this week, with nearly $300M liquidated. Most liquidations stemmed from stablecoin loans against (wst)ETH collateral as ETH dropped by 25%.

The protocol remained strong, adding $6M in profits to the Aave DAO. pic.twitter.com/KPBubM0t9C

— IntoTheBlock (@intotheblock) August 10, 2024

According to data from an on-chain market intelligence platform, IntoTheBlock, Aave V3 witnessed a similar liquidation on August 10th. IntoTheBlock highlighted that “most liquidations stemmed from stablecoin loans against (wst)ETH collateral as ETH dropped by 25%.” 

However, the market intelligence platform specified that the Ethereum lending platform added $6 million in profits to the Aave decentralized autonomous organization (DAO).

The AAVE price action set to break the resistance

According to CoinMarketCap, AAVE’s native digital asset currently retails for $104.47. The digital asset has recorded a 7% gain in the last 25 hours and a 5% gain in the last seven days. 

According to data from TradingView, the digital asset is trading in a range on the daily timeframe from $132.29 to $70.76. The chart shows that the digital asset experienced a strong bearish move at the start of August during the market sell-off induced by the Bank of Japan’s new interest rate policy. 

However, the AAVE bounced off the $76 support and has slightly recovered above the $100 mark. AAVE may find resistance at the $106.92 mark, causing a major fall to the bottom of the range, or break out of the resistance and surge to the $132.29 supply area.