Aave (AAVE) whale activity reaches two-year peak as lending expands

Aave (AAVE) has solidified its position in the top 40 of crypto assets. The Ethereum (ETH) expansion led to a recovery in lending. Aave is once again attracting whales at levels not seen since 2022.

Aave activity is increasing with this year’s bull market. As with other assets and protocols, Aave benefitted from the inflow of stablecoins and the rise of ETH market prices.

The latest upward leg for the crypto market also helped Aave recover its value locked to levels not seen since the 2021 bull rally. Aave now locks in more than $20B in liquidity, turning into the largest lending protocol after months of rebuilding. Aave is also considered one of the most undervalued protocols, with a market cap of $3.53B, just a fraction of the value carried in its lending vaults.

Over the course of 2024, Aave successfully replaced the unwinding of Maker and turned into one of the key sources of yield. Even Donald Trump’s protocol, World Liberty Financial, planned to build an instance of Aave for its own share of liquidity.

Aave had a slow return during this phase of the bull market, as the protocol was cautious about contagion and vetted its collateral assets. The real expansion of Aave started in October, with more sustainably high borrow volumes and growth of collaterals. USDC was the most borrowed asset, for its multiple applications in yield or trading.

AAVE broke into the top 40 tokens

AAVE broke into the top 40 after a 40% growth in the past week. The asset tracked closely the trend among altcoins, which have gone through accumulation for months. AAVE traded at $235.60, close to its 2022 range from before the bear market.

Aave (AAVE) traded at a one-year peak above $237. | Source: Coinmarketcap

The token traded near its yearly peak, with the highest volumes in the year to date. Open interest for AAVE expanded to a three-year peak above $171M, with a 70% prevalence of long positions. The open interest is much smaller compared even to meme tokens. AAVE is making a return after 900 days of accumulation and is yet to attract short-term traders.

Trading for AAVE is split among exchanges, thus forgoing concentrated pumps on Binance. This led to a more gradual growth for the token until now, when the official altcoin market was announced.

From 2025 onward, Aave will start unlocking its ecosystem reserve. Currently, AAVE tokens are more than 81% unlocked and have overcome the years of selling. The 2025 unlocks will be gradual, and will go toward ecosystem incentives.

From this range, AAVE is expected to test the $400 level, then move above its peak levels over $629. In an extended bull cycle, AAVE is expected to rival the former valuations of MKR with four-digit prices in the most bullish scenario.

Aave grows stablecoin liquidity

One of the key features of Aave is its partnership with other DeFi protocols. Aave is gradually incorporating other assets, one of which is Ethena’s USDe.

The synthetic stablecoin is considered riskier but has been released into Aave vaults. In two months, Aave moved up from an experimental 2M USDe to 620M. USDe can be used as collateral, releasing a total of $578M liquidity in other assets, with a margin for over-collateralization.

AAVE diminished the supply of GHO, its native stablecoin, back under the cutoff range of 175M. The current supply of GHO is back at 169M tokens, for now delaying a buyback and burn of AAVE tokens.

The liquidity profile of Aave is also shifting. The share of Arbitrum lending has increased to 20% of all volumes, with more influence from Avalanche and Optimism. Ethereum and Base remain the biggest platforms for Aave.

In terms of whale transactions, Aave is also returning to levels not seen since 2022. AAVE saw a total of 587 whale transactions based on Santiment data. Those monthly levels are the highest since March 2022, before Aave cut its liquidity in response to the shrinking crypto market.

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