Assessing AAVE’s performance after protocol launched its V3

Are you familiar with Decentralized Finance (DeFi)? If so, are you a Liquidity Provider? If your answer is yes, then you should know that Aave, the ghost protocol that allows you to borrow and lend cryptocurrencies, supply liquidity, and stake liquidity in the form of cryptocurrencies rolled out its V3 on 16 March.

According to the protocol, the V3 of the Aave Platform introduced significant changes to the platform. These changes included enabling cross-chain transactions, provision of higher borrowing power, the listing of new assets while protecting the protocol, and gas optimization among several other upgrades to the system.

A look at the performance of the protocol’s native token, AAVE,  showed some traction in early April following the launch. However, this was then followed by a reversal that plunged the price of the AAVE token further downwards. What else did we notice?

Price took a beating

On 16 March when the V3 launch was announced, the price stood at $122 per AAVE token. 75 days later, this stood at $101. Within that period, the token declined by 17%. During the period under review, the AAVE token marked a high of $259 on 1 April. However, the cryptocurrency market price correction that plagued the month of April forced the price downwards. Between then and the time of writing, the token shed over 50% of its price.

Source: CoinMarketCap

The market capitalization of the AAVE token also saw some decline within the period under review. Standing at $1.66 billion as of 16 March when the Aave V3 was launched, the token has since shed 15% of its market capitalization. At the time of writing, the market cap of the token stood at $1.41 billion.

Further to this, the AAVE token was no stranger to the price correction that most coins suffered in April. Movements on the price chart revealed significant bearish bias in April as the Relative Strength Index (RSI) and the Money Flow index (MFI) took their positions in overbought regions as the general market underwent a correction.

Since the reversal started, these indicators have both taken on an uptrend pointing at a gradual accumulation of the AAVE token. At press time, the RSI stood at 48.84 in an upward curve. The MFI also maintained a position at the 62.36 region.

Source: TradingView

Good days, but mostly bad ones

Within the period under review, a look at data from the chain showed that although the token recorded highs on some metrics on the same days, the holistic analysis pointed at an average performance at best. 

Within the said period, the number of addresses created on the network saw a 55% decline. Although a high of 603 new addresses was created on 29 March and 446 on 13 May, the growth of the network has not witnessed any significant improvement.

Source: Santiment

Following a similar trend, the transaction volume for the AAVE token also recorded significant highs just twice within the period under review. A transaction volume of 1.96 million on 29 March. Also, a transaction volume of 2.03 million was recorded on 11 May.

Source: Santiment

In addition, significant whale movements were spotted between 29 March and 1 April. For transactions above  $100k, a transaction count of 975 was recorded on 29 March. Similarly, on 1 April, a transaction count of 862 was recorded. This was then followed by a significant decrease in whale transactions count pegging this metric at four at the time of press.

For transactions above $1 million, the token also saw a high of 29 in transactions count on 29 March and 25 transactions on 31 March. This was followed by a reduction in transactions count and this metric was spotted at 11 at press time. 

Source: Santiment