DeFi crashed slightly in the past couple of days admist the decline of BTC and ETH price
Currently, the crypto space including DeFi is on the verge of booming yet again
TVL in DeFi rose sharply by a billion within hours of touching the lowest point.
Bitcoin was trading just under $57,000 at the time of publishing, after surging to its all-time high on the charts just a few days ago. Although that is something major, the performance of the market’s altcoins is also making headlines. While Ethereum is the most well-known, other altcoins, especially those with smaller market caps, have seen significant gains.
While the majority of the altcoin market has exploded in the last week or so, AAVE hasn’t, with its price action punctuated by occasional corrections.
Price correction, on the other hand, sometimes only tells half the story because it confuses other, potentially more significant, innovations and metrics. This may also be the case here.
Aave is a decentralized money market protocol at its most simple level. The Total Value Locked in Aave was $5.9 billion at the time of publishing, after reaching a peak of $6.4 billion. In reality, it had been on an uptrend since late February before falling in the last 24 hours.
Aside from the recent corrections, it’s clear that the said uptrend was more pronounced in April. Although this may normally be attributable to the altcoin market’s bullish rally, due to the token’s poor price results, this may not be the case. So, what’s next? A significant ecosystem development may be the solution.
AAVE revealed on March 31st that it is collaborating with Ethereum layer 2 Polygon to avoid the ecosystem’s notorious congestion, with CEO Kulechov saying that exorbitant gas fees shouldn’t restrict DeFi to five-figure portfolios. The team had said at the time,
“Polygon is the opportunity for the Aave community to onboard new kinds of collaterals.”
This was a significant improvement, and although its effects haven’t completely manifested, some noticeable improvements have occurred.
One of the topics in Spencer Noon’s latest newsletter was the same, with the Variant Fund investor highlighting a few metrics to illustrate the current progress. In line with the same,
“The Aave Polygon Market launched on 3/31/2020. An initial two weeks of organic growth bootstrapped the liquidity to $10m. On 4/13/2020, Polygon announced some generous liquidity mining incentives which grew liquidity x54 to $540m in less than 3 days.”
Further, since the announcement broke out, Aave V1 and V2 markets have onboarded nearly 50,000 users, with the figures for the same hiking by over 6% in the last 30 days.
Despite its poor price behaviour, Aave’s transaction volume demonstrated the organic growth its ecosystem has been experiencing recently. Although the protocol has handled over $100 billion in transactions, nearly a quarter of it was processed in the last month alone.
In addition, Aave’s credentials have often been used to tout DeFi’s openness in the face of the conventional financial system’s opacity. There is good reason to expect more from a protocol and its token when it is cited for organic and essential qualities such as clarity, rather than for its price spike.
Then there’s the issue of Aave’s cash and expenditure flows. This is an important issue, particularly given the token’s current value, which suggests that there isn’t enough of it. That might soon change, with many anticipating that Coinbase’s new “millionaires” would repurchase their way back into crypto. Though Bitcoin and Ethereum are obvious targets, Adam Cochran found that DeFi blue chips might emerge to be a popular option.
AAVE Market Sentiments
Aave was discovered to be one of these options, with other options such as Balancer, Maker, Compound, and Chainlink also attracting a lot of attention. This means that over the next few days, both of the above will see increased inflows, with the same likely to pick up speed if ETH accelerates towards $3,000.
Finally, although AAVE’s market action was relatively quiet, many of its technical indicators were bullish. Consider this: at press time, 75% of the alt’s holders were profiting, according to IntoTheBlock. Furthermore, the Net Network Growth metric, which measures regular address growth, was flashing bullish signals, and its whale addresses were seen to be consolidating their crypto positions.
With a market cap of $4.7 billion and a charted valuation of $372, there may be room for more upside, particularly given the aforementioned factors. If and when these numbers rise, it will only confirm the claims of those who assume that the market’s top crypto assets are still undervalued.