Aave Leads DeFi Lending Protocols with $11.85 Billion TVL

TLDR

• Aave, a decentralized lending platform, has reached a new record of about 40,000 active weekly borrowers.
• The growth is attributed to new lending markets on Layer-2 chains like Base and Scroll.
• Aave’s total value locked (TVL) has increased 70% this year to $11.85 billion, making it the third-largest DeFi protocol.
• The platform experienced significant liquidations in August, with Aave V3 recording $285 million worth of liquidations.
• The AAVE token price surged 9% on August 15, trading at $106.4, though still 84% below its all-time high.

Aave, the leading decentralized finance (DeFi) liquidity platform, is showing signs of both growth and challenges as the broader DeFi sector begins to recover. Recent data indicates a surge in user activity and token price, but also reveals significant liquidations on the platform.

Stani Kulechov, Aave’s founder, reported on August 14 that the protocol has reached a new record of approximately 40,000 active weekly borrowers. This figure surpasses the previous high set in late 2022. Simultaneously, the number of weekly depositors on the platform is approaching peak levels.

The growth in Aave’s user base is largely attributed to the emergence of new lending markets on Layer-2 blockchain networks. Base, a relatively new Layer-2 solution, now represents almost 30% of the total unique wallets on Aave V3. Other Layer-2 platforms like Arbitrum and Polygon follow closely, with 23.4% and 21% of Aave wallet shares, respectively.

Aave’s expansion aligns with a broader recovery trend in the DeFi sector. The platform’s total value locked (TVL) has increased by 70% so far this year, reaching $11.85 billion.

This places Aave as the third-largest DeFi protocol in terms of TVL, according to data from DeFiLlama. However, it’s worth noting that this figure remains below the protocol’s peak of around $20 billion, recorded in October 2021.

The AAVE token, the platform’s native cryptocurrency, has also seen positive movement. On August 15, AAVE experienced a 9% price surge, making it one of the top performers in the crypto market that day. The token was trading at $106.4, with its daily trading volume increasing by 78% to approximately $262 million. This pushed Aave’s market capitalization to $1.57 billion, ranking it 54th among the largest cryptocurrencies.

Challenges

Despite these positive indicators, Aave and other Ethereum-based lending protocols faced significant challenges in August. The month has seen massive liquidations across DeFi protocols, with total liquidations reaching $431 million. Aave V3 alone accounted for $285 million of these liquidations.

The surge in liquidations is largely attributed to market volatility triggered by global economic factors. At the end of July, the Bank of Japan’s interest rate hike caused a sharp strengthening of the Japanese yen against major currencies, leading to a significant crypto market decline. Ethereum, a key asset in many DeFi protocols, shed almost 40% of its value in less than 10 days.

This market turbulence affected collateral in Ethereum’s lending protocols, including Aave. The platform witnessed increased volatility as investors executed token inflows and USD outflows. According to data from IntoTheBlock, an on-chain market intelligence platform, most liquidations on Aave stemmed from stablecoin loans against (wst)ETH collateral as ETH’s price dropped.

However, it’s not all negative news for Aave. The same liquidation events that caused losses for some users generated $6 million in profits for the Aave decentralized autonomous organization (DAO), highlighting the complex dynamics of DeFi markets.

Looking ahead, Aave’s price action suggests potential for further growth. The token is currently trading in a range between $132.29 and $70.76 on the daily timeframe.

After bouncing off the $76 support, AAVE has recovered above the $100 mark. The next key level to watch is the resistance at $106.92, which could either lead to a breakout towards the $132.29 supply area or cause a retreat to the bottom of the range.