• Aave may be on a downward spiral, but here’s why there’s still hope for him

  • Most DeFi tokens have recently performed inconsistently. The China crackdown FUD did have an impact on the broader DeFi market, but it did not send these tokens into’summer’ mode. Their recovery, however, has been notable over the last week.

    Individually, Uniswap, Curve Finance, and SushiSwap have increased by 5% to 7% in the aforementioned timeframe.

    Why is AAVE not at the party?

    In the last ten days, AAVE has spent more time below $300 than above it. With the decrease in value and market cap, the token has also fallen in its overall rankings. And a number of fundamental factors are to blame for this.

    In just 10 hours, the cumulative value locked in DeFi increased dramatically from $86.2 billion to more than $90.3 billion. Curve Finance, Uniswap, and SushiSwap led the charge. In fact, their individual TVLs experienced increases ranging from 4% to 6%. Aave, on the other hand, experienced a 3% decline during the same time period.

    The primary cause of Aave’s liquidity crisis has been a decrease in the number of unique lenders. In fact, the chart below clearly shows the dramatic difference in the state of this metric over the last year. The pace of liquidity mining on the platform has inevitably slowed.

    As a protocol that allows people to lend and borrow cryptocurrency, the aforementioned data can be used to assess Aave’s state.

    The deterioration of fundamentals has had an impact on the state of the token’s on-chain metrics. There hasn’t been a recent influx of newcomers to the Aave market. The number of active addresses has dropped from more than 1.5 percent to 0.9 percent in just one month, according to ITB’s address statistics.

    The exchange outflow figures were also more skewed to the downside, indicating a lack of buying momentum. Indeed, the diminishing returns provide no incentive for new participants to purchase new tokens or enter the Aave market.

    More than half of the addresses were experiencing notional losses at the time of writing.

    There is still hope.

    The pace of the protocol’s development activity provides some respite in the midst of the gloomy state of most of the metrics. As evidenced by the attached chart, the same has been occurring at a rapid pace over the last few weeks. Furthermore, this would most likely have a positive impact on the fundamentals in the near future.

    Furthermore, Aave’s counterparts have recently performed better on the majority of fronts. The DeFi market, more often than not, swings up and down in tandem. As a result, if Uniswap, SushiSwap, Curve Finance, and others continue to perform well, Aave’s recovery will be aided by the favorable environment.

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