Whale buying supports the latest Aave (AAVE) rally

Aave (AAVE) has shown signs of growth despite the overall market downturn. The lending protocol aims for expansion in 2024, after lagging behind for most of the bull market. 

In the past two weeks, whale buying returned to Aave (AAVE), adding to its price action above $130. Recently, AAVE moved against the market, with limited losses, trading at $131.30. The AAVE price hardly reacted to the recent news of a small-scale hack, which carted $56,000 in ‘dust’ from a smart contract for collateral repayments.

The latest price action coincides with signs of whale accumulation in high-profile wallets. The most recent transfer moved 50,604 AAVE valued at $6.5M from one of Binance’s hot wallets. The same whale wallet bought AAVE at the end of August, investing 4,000 ETH at an average price of $135 per AAVE. 

A single wallet managed to build a position in AAVE starting from zero just three weeks ago. Now, the whale holds more than $16.5M in AAVE tokens, as well as wrapped BTC and ETH compatible with the DeFi ecosystem.

The wallet, however, does not belong to a single entity and may reflect overall market demand. The address is identified as belonging to the Gnosis Safe Proxy, a custodial service for holding various tokens for DeFi purposes. In any case, the demand was enough to sway the price and show growing interest in AAVE. 

The recent interest from large-scale buyers compensates for other whales unwinding their positions. One of the big AAVE holders liquidated previous holdings, acquired at a price of $245 on average. The wallet sold at a loss of 49.5%.

Aave aims for mainstream adoption

AAVE has achieved gains against Bitcoin (BTC) and Ethereum (ETH), but its USDT pair shows smaller activity. The asset is preferred by buyers at scale and whales and is less often the selection of small retail wallets. 

Additionally, AAVE may be spreading to the mainstream financial ecosystem. A snapshot from BubbleMaps shows Cumberland has been involved with high-volume transactions . Some of those transactions are communicating with Robinhood wallets. 

The wallet cluster is another indicator of growing demand for AAVE, as the protocol compensates for weaker market performance. Aave now aims to become more conservative and offer services tied to mainstream finance. Sky Aave Force, a newly launched feature, will grant access to USDS stablecoins and a savings account. 

As of September 4, Aave is running a temp check proposal for the adoption of USDS on Aave V3. The Aave lending protocol already functions as a cross-chain hub, with versions on some of the leading L2 chains. Aave is most active on Base, Arbitrum, and Polygon, with the smallest fraction of wallets coming from the Ethereum mainnet.

With the adoption of L2 networks, Aave aims to further lower fees and prepare for mainstream adoption.

Despite this, AAVE remains at risk for liquidation, since it still accepts BTC and ETH. While those blue chip assets are safer, they still fluctuate and may lead to loan liquidations.

Aave protocol aggressively grows GHO supply

One of the reasons for loading up on AAVE may be the next goal for the project. The lending protocol aims to expand the supply of its GHO stablecoin, with the potential for buybacks and burns. 

GHO is one of the low-supply stablecoins, which did not expand as far as DAI or USDe. In early August, GHO started off with a supply of 95M tokens, climbing to 124,2M tokens in the past four weeks. The target for GHO is to grow its supply above 175M tokens in the next few months, before initiating token buybacks.

The supply is still comparable only to niche tokens, despite the growing influence of the Aave protocol. At the same time, AAVE has already accrued more than $11B in value locked through its collaterals and loans. 

The value locked is significantly higher than the AAVE market capitalization at $1.92B, leading to expectations of more AAVE rallies. More than $7.42B have been borrowed by the protocol, yielding more than $283M in annual fees. 

As of September 2024, Aave also has more than 83K active monthly users. Aave is second only to Lido and Eigen in terms of value locked, due to the specific structure of ETH liquid staking. Aave also easily surpassed Maker DAO, which is now in the process of reorganizing its collateral and token structure. 

Cryptopolitan reporting by Hristina Vasileva