Crypto lending protocol Aave restarts its bullishness because the market resets. AAVE, the namesake token of the platform, surged to almost 20% up to now 24 hours, capturing the momentum of the broader market which remains to be up by over 5% since yesterday.
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Aave’s recent developments also contributed to this rally. Nevertheless, the broader crypto-finance market is likely to be in disagreement with the platform’s current performance.
$200 Million In Market Size Unlocked On Aave
Lido Finance, a crypto staking platform, recently onboarded the platform’s Lido V3 market instance, custom-made for Aave which is tailored to Lido’s staked Ethereum (stETH) and wrapped staked Ethereum (wstETH). It will significantly improve user experience in lending and borrowing stETH and wstETH as it may possibly be fine-tuned to maximise profitability for Aave users.
The Lido V3 market on @aave has been live for 48 hours and just surpassed $200m in market size 👻
Here’s what that you must know 👇 pic.twitter.com/aNSGxsq2fy
— Lido (@LidoFinance) July 31, 2024
This helped AAVE get well in price. The platform also experienced a major bump in the entire value locked (TVL) with a near 10% increase since yesterday. Nevertheless, the broader market appears to be at odds with Aave’s recent bullishness.
The 2nd quarter revealed some cracks inside the lending portion of the decentralized finance (DeFi) space. In line with CoinGecko’s 2nd Quarter research, over $31.87 billion in TVL is devoted to lending, marking a major cut of the pie on DeFi. Nevertheless, the primary functions of DeFi akin to staking, lending, and cross-chain bridges saw an enormous decrease in TVL, totaling over $8 billion.
The worth that left these sectors returned in the shape of restaking in other platforms or to basis trading protocols that saw a whopping 154% increase in TVL in Q2.
This decrease in lending activity also translated to the assets on the platform. Blockanalitica reveals that a majority of the wallets that hold collateral on Aave are either medium or high risk.
If the market drops by 25%, majority of the wallets are within the red which represents liquidation. This shows that lending on DeFi stays to be dangerous, especially with the present market volatility experienced this week.
AAVE market cap currently at $1.4 billion. Chart: TradingView
A Short Squeeze?
AAVE is currently occupying the range between $93 and $102. This position, although a giant downgrade from its return from June price levels, is a solid support for a possible breakthrough within the near future.
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Nevertheless, because it moves independent of the market, this current bullishness might just be a brief squeeze or a sudden increase in price before a pointy fall.
With the present market environment reflecting this volatility, AAVE could have a tough time securing its June price level bringing in the potential of further downturns.
Featured image from Zerion, chart from TradingView