Aave (AAVE) Recovers, Signals Pro Market Launch
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The breakout of Aave (AAVE) continues for the second day in a row, on expectations the growing DeFi protocol will be open to institutional investors. AAVE broke out from its lows under $200 to levels not seen since before the crash in June.
AAVE traded at $334.22 on trading volumes just below $1B. The rise in AAVE coincides with a general recovery across all DeFi tokens.
The expansion of AAVE coincided with rumors of an upcoming launch for AAVE Pro, a platform targeted at institutional investors. The plans for expansion were part of a closed training for traders, and for now there are no details on which institutions have shown interest in AAVE. The news of AAVE Pro came from trader Noah Goldberg based on a recent remote training in DeFi.
The DeFi space remains unregulated and highly risky. But in the past months, AAVE turned into one of the more influential DeFi projects, carrying up to 15% of the total value locked (TVL) in various passive income and decentralized trading projects.
How AAVE Attracts Investments
AAVE claims to be a leaderless, decentralized protocol for building liquidity pools, crypto-based lending and other passive income pools. All asset deposits are non-custodial, meaning they are always available to the owner of the tokens or other assets. The deposits, financial operations and trading are all accomplished through smart contracts.
AAVE gained new users and popularity in the past few months, as it became accessible through the Polygon (MATIC) protocol, meaning all operations now happen with much lower fees in comparison to using the Ethereum network directly.
AAVE holds more than $17B in value locked. The AAVE protocol allows staking for a total of 26 assets, which include most of the popular stablecoins, though wrapped ETH has the biggest share of $2.9B equivalent. AAVE allows for alternative uses for all the leading DeFi tokens, including DAI, MKR, UNI and other tokens based on connected decentralized protocols. This means AAVE becomes a hub for arbitrage in seeking out better passive income.
Beyond the crypto value locked, AAVE has raised six rounds of funding for a total of $49M, and has support from some of the biggest crypto firms, including Blockchain Capital and Winklevoss Capital.
AAVE is also one of the assets currently under consideration from Grayscale Capital, as the fund aims to expand access to a new batch of crypto assets.
Is AAVE a Good Investment
AAVE, like all other digital assets, is extremely risky. While DeFi usage is growing, it is also an unexplored area. AAVE has lost more than 50% of its value within weeks, though movements on the upside are also quite rapid.
AAVE enthusiasts expect growth in valuations as more funds are locked into AAVE liquidity. The interest in DeFi also hinges on ETH prices. AAVE also works as a governance token, giving voting rights on changes in the underlying protocol.
The AAVE founders and team have already survived one bear market, as the project initially explored ETH lending. ETHLend, the original startup, held an ICO in 2017, but its LEND token did not survive the subsequent bear market in 2018. AAVE was the platform’s reboot, which appeared in the beginning of 2020. At that point, AAVE traded at $52, while currently the community expects four-digit valuations.
DeFi Tokens Boom Once Again
Overall, DeFi tokens gained more than 7% on average, to value the market at above $83B. Most assets are trying to recover previous levels, and in the short term offer more robust gains in comparison to large-cap coins and even BTC returns.
Maker (MKR) is once again above $3,000 after a daily gain of 11%. Uniswap (UNI) recovered by 11% to $22.44. Compound (COMP) is up more than 22% overnight to $515.26. DeFi tokens reflect a mix of speculative trading and gains in value locked. TVL in all DeFi projects crept up to above $56B.
AAVE was also the growth leader in value locked, as its assets expanded by more than 7% in a single day, securing its top spot among DeFi protocols.
ETH Gives Boost to DeFi
ETH market prices are starting to reawaken in expectation of the London upgrade later in July. ETH rose by about 3% on Tuesday, to $2,338.84. ETH gained more than 9% in the past week while BTC trading stagnated.
Valuations may get a boost from growing deposits to the ETH 2.0 smart contract. The ETH 2.0 deposit contract now holds more than $14B in value, or above 6M ETH. This is comparable to the ETH locked in some of the biggest DeFi protocols.
ETH still has more than 100M tokens in circulation, but locking those tokens may continue to create scarcity, along with fee burns and lowered block rewards.
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