{"id":181636,"date":"2021-02-04T20:52:58","date_gmt":"2021-02-04T20:52:58","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=181636"},"modified":"2021-02-04T20:59:22","modified_gmt":"2021-02-04T20:59:22","slug":"aave-surges-50-whats-behind-the-meteoric-rally","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/aave-surges-50-whats-behind-the-meteoric-rally\/","title":{"rendered":"Aave surges 50%: What’s behind the meteoric rally?"},"content":{"rendered":"

AAVE, the native governance token of the Aave lending protocol, rose by over 50% within the past day. The rally comes as the entire DeFi market<\/a> sees a major rally from an overall increase in appetite for the sector.<\/p>\n

\"aave\"
The 30-minute price chart of Aave. Source: AAVEUSD on TradingView.com<\/a><\/figcaption><\/figure>\n

Why is DeFi and Aave rallying?<\/h2>\n

The DeFi market has seen more traction from both retail and institutional investors.<\/p>\n

Institutions are interested in DeFi because many DeFi projects<\/a> have actual cash flow. This makes DeFi protocols comparable to conventional companies using traditional valuation models.<\/p>\n

As the overall demand for DeFi increases, naturally, two major subsectors are seeing rapid growth: lending and oracles<\/a>.<\/p>\n

Lending platforms, such as Compound<\/a> and Aave<\/a> have seen a large increase in user activity and lending volume, thus causing their respective valuations to soar.<\/p>\n

Analysts at Santiment noted that the number of AAVE whales has increased significantly in the past month. This is indicative of high-net-worth investors continuing to accumulate Aave.<\/p>\n

The analysts explained<\/a>:<\/p>\n

“#DeFi is alive and well in #crypto, as $AAVE has skyrocketed to a +33% gain in the past day. #Aave whales, which we deem addresses holding 1,000 tokens or more (~$397k+ USD), have ballooned from 266 to 327 addresses this past month, fueling this rally.”<\/p><\/blockquote>\n

The continuous accumulation of AAVE by whales and high-net-worth investors, especially in the U.S., is seemingly causing the price of AAVE to increase.<\/p>\n

Will whales buy even at a high valuation?<\/h2>\n

Currently, the market capitalization of AAVE hovers above $5 billion. Apart from Chainlink<\/a>, which some consider to be a DeFi token, no other DeFi protocol has achieved a $5 billion market capitalization before.<\/p>\n

Although the market capitalization of Aave<\/a> is quite high at $5 billion, investors anticipate Aave to remain the dominant DeFi lending protocol.<\/p>\n

If it does, with the total value locked in DeFi moving towards $40 billion, the probability of Aave reaching a valuation that allows it to become a top ten cryptocurrency increases massively.<\/p>\n

Arthur Cheong, the founder of Defiance Capital, the largest DeFi-focused fund in Asia, said it is likely that Aave becomes more valuable than any European fintech startup by 2022.<\/p>\n

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Think it's likely $Aave<\/a> will be more valuable than any European fintech startup by 2022. https:\/\/t.co\/DS96JkMr86<\/a><\/p>\n

— Arthur (@Arthur_0x) February 3, 2021<\/a><\/p><\/blockquote>\n