[TL; DR]
Aave recorded a more than 45% price rise within one month.
The fee switch feature will incentivize investors to stake their Aave.
Increased whale buying activity in August contributed to the Aave bullish moment.
Introduction
A unique thing about the cryptocurrency market is that the various assets perform differently despite operating in the same macroeconomic conditions. One reason why their performances differ are their fundamentals and use cases. In the recent bullish period Aave was one of the main gainers, outperforming other major cryptocurrencies. In this analysis, we look at the reasons for its 45% price surge.
Analyzing Factors behind Aave 45% Price Surge
Aave, the native cryptocurrency for the Aave, a decentralized crypto lending platform gained by over 45% within a four week period that stretched to the end of August. The token outperformed all the top 100 cryptocurrencies, based on market capitalization. Helium's HNT that rallied by 26% was the second best performer within the period, faring better than the leading pack of bitcoin, ETH, BNB and Solana, among others. However, despite its outstanding price rally Aave’s total value locked (TVL) is still far less than the 2021 peak of over $32 billion.
There are several triggers for Aave’s 45% rally that include changes in its fundamentals. One of the key proposals which resulted in the rally was Marc Zeller’s, founder of the Aave-Chan, initiative to introduce a fee switch mechanism. This system involves redirecting the extra revenue from the platform to important key ecosystem players such as the stakers. Another aspect of this system is buying back the Aave from the secondary market when there is revenue to do so. That additional incentive for staking and holding the token was well-received by the investors leading to the price spike.
The umbrella proposal was the other factor that influenced the Aave token price to rise significantly leading to its financial growth. This is a move to change the existing “seize and sell” process of liquidating loans (bad debts). As expected, the “seize and sell” process increases the selling pressure which is not good for the Aave crypto price action. The team proposes to replace this “seize and sell” liquidation process by the “seize and burn” strategy. With that, the platform will use AAVE’s GHO stablecoin and aTokens which represent the assets of the depositors.
The other factor that led to the recent Aave price increase was a rise in whale activity during August. LookOnChain has given an example of a whale that acquired 77,270 Aave tokens. A Crypto Whale Acquired Aave Tokens- x.com/Lookonchain
Based on crypto investment trends whales influence the values of cryptocurrencies by buying or selling them in large quantities. In this case, some whales have been buying Aave in large quantities leading to its recent bullish market performance. For example, between 20 and 21 August alone two whales acquired Aave worth $12.02 million.
The fact is that the tokenomics discussion relating to fee switch and the umbrella proposals made many investors to refocus their attention on Aave crypto. In the end, many investors started viewing the crypto assets as a blue chip DeFi asset that reflects the growth of the whole crypto market. That change in market sentiment gave the asset the additional push it required to rally. Some investors even proposed that the Aave crypto is undervalued and would profit in the future if they buy it now. Aave is Undervalued- x.com/Aurron
Aurron, with X username @AxieAur, is one of the investors who thinks that Aave is undervalued.
Aave Ecosystem: Its Role in the DeFi Sector and its Functionalities
Another thing that can assist us to appreciate the recent Aave price surge is to understand its role in the DeFi sector and the entire crypto market. Basically, Aave is a decentralized lending protocol that exists on the Ethereum blockchain. As such, the platform allows people to lend their cryptocurrencies and earn interest. On the other hand, interested individuals can borrow some crypto assets.
It is important to note that the borrowers use their cryptocurrencies as collateral. Usually, they use Aave as collateral and will be able to borrow crypto assets such as ETH, wBTC and USDC. The fact that Aave handles different types of cryptocurrencies makes it a very important institution in the DeFi sector.
The Future of Aave: Its Prospects in the DeFi Sector
The popularity of Aave is likely to increase in the future with the rise of the DeFi sector. Each year new crypto users come onto the market. Some of these newcomers to the sector may need to invest in Aave through lending. On the other hand, other people can borrow cryptocurrencies of their choice. That may help to drive the Aave value up. Some analysts believe that the Aave price may reach $530 by 2030. Even in the short term its value may rise as well. Considering that Aave is currently trading at $26.02 its price may surpass $50 by the end of 2025.
Based on the current crypto analysis Aave may remain the leader in the decentralized lending sector due to its ability to innovate and bring new products on the market. For example, recently Aave approved the introduction of its stablecoin, GHO, pegged against the US dollar.
Conclusion
The proposed changes to the Aave tokenomics have resulted in its recent price surge. For example, there is a proposal to introduce a fee switch that will enable its additional revenue to be channelled towards key players such as stakers. The rise in Aave whale buying activity during August also contributed to its bullish moment. Looking into the future, Aave is likely to introduce new developments that will lead to the growth of the DeFi sector.