Aave v3 loans surge, hit record high on Ethereum

Posted: September 1, 2023

• Stablecoins, including sDAI and GHO, propelled Aave V3’s $100 million loan record.
• Assets staked on the protocol reduced in the last 24 hours.

A whopping $100 million— that was the value of loans issued on Aave [AAVE] on Monday 28 August. The landmark, a record high, was reported by Lucas Outumoro,  IntoTheBlock’s Head of Research.

Realistic or not, here’s AAVE’s market cap in ETH terms

As a decentralized non-custodial liquidity protocol, Aave allows users to participate as suppliers, lenders, or borrowers. Suppliers on Aave v3 can provide liquidity to the market, and earn interest on the assets provided.

Borrowers, on the other hand, are able to borrow assets like Ethereum [ETH] using overcollateralized means. The recent surge in activity has sparked considerable interest and speculation about the factors behind this sudden growth. 

sDAI and GHO change the game for Aave

According to Outumoro, the remarkable turn of events could be linked to the introduction of sDAI and ETH borrow costs. In turn, it increased demand for the loans.

The daily amount of loans issued in Aave v3 on Ethereum hit a record high of $100M+ on Monday

The introduction of sDAI as collateral and improvement of $ETH borrow costs appear to be driving the increase in demand pic.twitter.com/F8Eh6b3YXe

— Lucas (@LucasOutumuro) August 31, 2023

For context, sDAI allows DAI depositors to earn interest on any protocol while maintaining liquidity. The sDAI idea is similar to the way users earn with Liquid Staking Tokens (LSTs).

Furthermore, Aave’s V3 lending platform’s ability to smash the record for previous loans on the Ethereum network has now placed it in the top spot as the go-to market for ETH borrowed.

According to data from TheBlock, Aave beat other protocols including Compound [COMP], Iron Bank, and dForce to take the top spot. Besides, being the number one lending platform was not just limited to DAI. 

But Aave also topped other projects when it comes to involving other stablecoins like Circle [USDC] and Tether [USDT]. As a result of the increase, Aave also became the largest holder of sDAI. As of this writing, it boasts owning 5.38% of the entire supply.

Source: The Block

Just a day before, the protocol was second in this regard. However, the activation of its decentralized stablecoin GHO ensured that it reached the milestone in little time.

22 hours later.. @AaveAave is the largest holder of $sdai with 5.38% (40.5m) of the supply, while spark is second with 4.63% (35m) 🥳

Well done for the quick integration! @lemiscate & team. https://t.co/tWRwXWXkiH https://t.co/EgqcuNyAX5

— StablesCap (@StablesCap) August 31, 2023

Not the required catalyst for a TVL boost

However, Aave’s remarkable performance in lending failed to positively impact its Total Value Locked (TVL). At press time, Aave’s TVL was $4.52 billion—a 2.81% decrease in the last 24 hours.

How much are 1,10,100 AAVEs worth today?

The TVL is a metric used to measure the total value of assets locked or staked in a protocol. If the TVL increases, then it means the protocol in question has become more trustworthy.

However, a decrease in the TVL implies restriction in uniquely depositing assets into the protocol. Therefore, Aave’s decrease in the TVL means market participants resisted increasing the liquidity of the Aave protocol. 

Source: DefiLlama