AAVE investors exit despite revenue surge – Who will hold the line now?

Key Takeaways

How is the protocol doing on the earnings and revenue front?

Earnings have been surging lately, climbing to its fourth-highest level since 2020, with revenue growth on the up too

Has it been all good news though?

The Total Value Locked (TVL) outflows dropped by $682 million, even as derivative traders bet on a rally.

Aave [AAVE] saw decent growth over the past 24 hours, with the crypto gaining by 4% on the charts.

However, the positive outlook didn’t seem to directly correlate with on-chain activity, especially since capital outflows have been dominant lately. Hence, the question – What does this de-correlation mean for price action?

Earnings and revenue performance remain positive

Recent earnings data from Aave, which track revenue excluding user incentives, underlined a strong surge at press time.

In fact, according to DeFiLlama, Aave’s earnings climbed to $12.686 million, marking the fourth-highest quarterly reading since inception. This surge was evidence of heightened activity and usage on the protocol.

Source: DeFiLlama

Notably, fee generation this quarter also climbed to $124.59 million, just slightly over a month into the quarter.

Such a steady rise in both fee generation and earnings alludes to a solid outlook for investors assessing Aave’s earning potential.

However, there’s more to it. In fact, holders who collectively earned $27.3 million from their AAVE holdings have begun exiting the network recently.

Capital flight raises concern

Capital outflows in the market have remained dominant, as tracked by Aave’s Total Value Locked (TVL).

In just one day, the TVL recorded outflows of $682 million – A significant sell-off. This brought the total to roughly $32.23 billion.

The scale of these outflows represents more than just profit-taking though. It indicates that investors are withdrawing from potential earnings worth $27.3 million this year (A very positive sign), while shifting their funds to stablecoins.

Source: DeFiLlama

Trading volume has also declined simultaneously, suggesting that users are not actively transacting AAVE and that momentum behind the recent 2.4% price jump was weak.

It also marked the lowest trading volume since 02 November. Unlike that period, however, the TVL slightly rose, highlighting a hint of bullish sentiment.

Still, the persistent outflows do add significant pressure on AAVE. This could push the asset further down the price charts.

Why do traders remain bullish?

Perpetual traders are continuing to bet on an AAVE rally, despite heavy outflows from on-chain investors.

At the time of writing, the Open Interest Weighted Funding Rate had been positive at 0.0059% over the past 24 hours. What this suggested was that most of the $282 million liquidity in the market has been coming from long traders.

Source: CoinGlass

Spot retail investors are also joining the bullish sentiment, purchasing $1.03 million worth of AAVE in the last 24 hours. This week alone, $8.89 million worth of AAVE has been bought – Nearing double-digit figures.

However, the capital inflows from spot and derivative traders are still short of the large-scale sell-offs by on-chain investors who have offloaded hundreds of millions worth of AAVE.