Stani Kulechov created Aave, initially known as ETHLend, in 2017. The project is a non-custodial, open-source protocol that provides a reliable framework for lending and borrowing assets with fixed and variable interest. Aave enables its users to earn interest on their deposits as a means of passive income while borrowers can borrow assets at good interest rates.
Aave is a decentralised market protocol where users earn a passive income and the AAVE token is used to govern the platform. The money market protocol has gained popularity over time and AAVE has risen considerably in value. AAVE token values at $316.25 as of 2 August 2021.
Established in 2017, Aave is a decentralised platform that for some years used an automated market maker model to bring liquidity to the market. Although it previously used the LEND governance token and aTokens (these are only to show an investor’s deposited assets), when the project migrated to a decentralised autonomous organisation (DAO) model it issued a new token, the AAVE, in the autumn of 2020. Holders of the ERC-20 compliant AAVE tokens are granted voting rights and take part in community governance, being able to have a say in the future direction of the money market protocol.
The rising prices of cryptos have made them a good form of investment, but with tokens sitting idle in wallets and exchanges, token holders are unable to earn from their assets unless they sell them. The Aave protocol allows people to transfer their assets into different pools. The depositors provide liquidity to the lending protocol, allowing token holders to earn a passive income.
In Q3 of 2020, a hacker was able to use Aave’s flash loan service and take out an 80,000 ETH loan, only to use it on another platform. Since neither the AAVE token nor the platform’s pools were affected, the token’s price was not impacted by the hack.
Despite the passive use of the Aave platform in the hack, the token has done well since its inception. It saw its first major price hike at the start of February of 2021 as the crypto market saw intense activity with nearly every coin gaining value, even though another Aave flash loan was used to target yet another decentralised finance (DeFi) platform.
The crypto surge was short-lived and as the market became overbought and took a downturn at the end of the month, so did the AAVE token, losing as much as 39% of its then all-time high value of $529.26 and dipping as low as $324.93.
Another flurry of crypto buying in May saw the AAVE token hit its all-time high of $661.69. Although the market has cooled down and there has been a significant downturn, the AAVE token is at $316.25 at the start of August 2021, which still represents gains of 463% since the token launched.
October 2020: Aave protocol transitions to a DAO as governance rights are transferred to LEND holders (the original Aave token). A 100:1 LEND to AAVE migration is initiated. (AAVE price peaks at $56.41, but falls significantly to as low as $27.96 as the month closes)
November 2020: Bitcoin struggles at $18,000 as bulls and bears continue to fight a tight range. DeFi platforms see a surge in their token prices as they provide alternative investments. (AAVE alone rallies by 214% to reach more than $80)
December 2020: The Aave V2 protocol is released, enabling users to trade their locked assets and have the ability to take out stable and variable loans simultaneously. (AAVE token reaches as high as $90)
January 2021: As the crypto market starts gaining momentum, AAVE also rallies with a significant boost. (AAVE crosses the $100 barrier for the first time)
April 2021: The Aave platform launches on the Polygon network with $12 million in deposited assets and $7 billion borrowed. The Polygon network offers faster and cheaper transactions, with only $158 spent on gas during this time. (AAVE achieves $467, another local high)
May 2021: An unprecedented uptick in the price of AAVE coin is witnessed. Aave protocol starts testing specific pools for institutions to “practice” DeFi before jumping in. (An all-time high of $661.69 is achieved on 18 May)
June 2021: Aave’s total value locked (TVL) crosses $20 billion. (AAVE varies between $400 and $300 in the first half of the month, but dips for the rest of the month into the $300 to $200 range)
July 2021: Continuing its development of institutional-grade services, Aave protocol launches Aave Pro, a permissioned liquidity protocol that is regulatory compliant and whitelists addresses that can take part in it. (Price jumps on the news to a three week high, crossing $340)
Tapping in on the ability to create money market pools, Aave users enjoy the benefit to earn a passive income, while borrowers are able to borrow different tokens against their digital assets. The AAVE governance token has cemented its demand as it gives users the right to determine their own financial future on the platform.
While it was launched less than a year ago, the AAVE token stems from the old LEND utility token, migrated with a 100:1 ratio. The AAVE token started its existence with a $56.16 price tag and since then, has seen huge gains, reaching as high as $661.69. Let’s see how AAVE has performed when compared with other assets, both crypto and mainstream.
Compare Aave with the US dollar
The US dollar has high-value retention and it is accepted worldwide. But its downside is that the dollar comes under a central monetary system that is under the control of the Federal Reserve. The Fed has complete autonomy over its issuance and its price can easily be changed, either arbitrarily or through an influx of supply.
Even as a governance token, AAVE has an advantage over the greenback. There are only 16 million tokens, making it a scarce asset. With more than 12.9 million already in circulation, the supply growth is low and demand high. With its finite supply, the coin has appreciated well, with gains of 463% since its launch in 2020.
Compare Aave with Gold
Reputed metals like gold have always been considered lucrative and an ideal option for investment assets to gain profits. In the testing times of the COVID-19 pandemic or any other economic crisis, Gold has served as a pillar of value and a sought-after commodity. At the start of 2021, Gold was hitting a high price with an opening at $1,887 per troy ounce but reached its lowest of $1,684 on 1 April and has not yet provided any major profits to investors as it creeps back to near its 2021 starting price.
On the other hand, AAVE has gained major ground in 2021, providing year-to-date (YTD) returns of 258%.
Compare Aave with Bitcoin
Dubbed the King of Crypto, Bitcoin has always led the crypto race with its dominance and market capitalisation. The heavyweight has an influence on the overall crypto market and when it moves significantly, other tokens join in.
That being said, AAVE has proved itself to be a formidable challenger, at least in terms of profits. Bitcoin has increased 37% YTD and has churned out a massive 123% profit if people had bought on 1 January 2021 and sold it on 14 April at its all-time high (ATH) of $64,804.
AAVE has proved to be a better option though. The YTD profits are nearly seven times better at 258%, while if you had capitalised on profits on the same date that BTC achieved its ATH, you would have bagged nearly three times as much in returns at 352%
Compare Aave with Ethereum
Built on top of the Ethereum ecosystem, the Aave protocol has been able to leverage the large Ethereum user base and its DeFi capabilities. The trustless smart contract features of the second-largest blockchain have been used to create the money market protocol of Aave and the ERC-20 standard AAVE token.
As the blockchain used most for DeFi, Ethereum has seen massive growth, along with its ETH token. Compared with AAVE, the YTD profit ratio is neck and neck, ETH offering 252% while AAVE provides 258%. The all-time high is a different story, however. This year Ethereum hit $4,356.99 to generate YTD profits of 490%, while the AAVE all-time high of $661.69 meant token holders could have reaped a staggering 649% YTD profit.
While peering into the future remains the realm of Sci-Fi, there are still methods that can be employed to make predictions. This is done in two ways, fundamentally by looking at qualitative data and technically through maths and finding trends. Aave is no exception. Unlike other major coins that have had a few years worth of history, market sentiment and number crunching trends, the AAVE token is relatively new. Even so, there are broader methods that can be employed.
Although nothing is certain in the end, using fundamental and technical analysis can assist in locking down as many variables as possible to have an understanding of where the prices can swing, both in the short and long term.
Let’s see how these factors affect the AAVE token price in the near and far future.
With experts predicting that DeFi still has the potential to surge again before the year is out, the rest of 2021 is going to be a very interesting time. At the same time, COVID-19 seems to be resurfacing with the Delta variant and that might lead to the fight against the virus stretching out a bit more, even with inoculations on the rise. If this does happen, people will still be largely interested in DeFi to hedge against rising inflation and the Aave protocol is a perfect solution for both people looking to supplement their income and others who want to take out loans against their tokens.
Some analysts believe the AAVE token could mostly remain above $500, with an average closing price of $620, perhaps even going as far as to cross $700 if the aforementioned factors come into play.
While institutional investment in cryptos is on the rise, mainstream firms have yet to truly embrace DeFi. The Aave Pro launch is just the right move and as corporations and financial institutions start using it, there is a chance of a large rise in the value of the AAVE token as the protocol will have the perfect opportunity to cement its place and become the leading corporate investment platform.
There might be challengers, yes. But taking into account that Aave has a history of being regulation friendly (licensed by the UK’s FCA and even has a KYC-based whitelisting procedure on Aave Pro that allows only approved wallets to connect), Aave Pro could have a major advantage.
Furthermore, as a DAO, Aave protocol is much more adaptable to changes in the market and token holders voting for new token lending pools will always keep it on top of things.
Barring any unforeseen scenarios, the DeFi market will keep on growing as fiat and other traditional investments are unlikely to give as much profit as AAVE. The most likely scenario is the price steadily rising to cross $700 and continuing to grow, with a best-case scenario of beyond the $1,000 range.
With a short history of less than a year, peering so far into the future of AAVE token makes it difficult to say anything with confidence, but AAVE still has an overall positive outlook. Progress in central bank digital currencies (CBDCs), more mainstream adoption of blockchain, a regulation-friendly atmosphere and the continued fiat inflation will mean that cryptos will gain ever more traction and AAVE will likely enjoy these benefits.
As the years pass, according to many crypto experts, AAVE could command the best possible prices that are just shy of $2,500 beyond 2022, even as high as doubling after about 3 years.
Adaptability (from simple lending to holistic lending and borrowing protocol with liquidity pools), legal compliance, DAO features and institutional investor-friendly services are just the tip of the iceberg as Aave protocol continues to evolve. With demand rising steadily for its lucrative AAVE token and limited supply, the coin is in a perfect position to appreciate in value as the years pass.
Though price volatility is something that can unnerve some people, this is an inherent feature of cryptocurrencies. Even so, this should not put off interested parties as the price fluctuations can come in handy. Buying the AAVE dips and selling high also opens the doors to increasing net wealth, getting hold of more tokens and, consequently, enjoying the price increase and potentially increasing passive income.