Crypto lending protocol Aave has resumed its rally as the market resets. The platform’s token, AAVE, has surged nearly 20% in the past 24 hours, riding on momentum Wider The market is still up over 5% since yesterday.
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Recent developments at Aave have also contributed to this surge. However, the broader crypto finance market may not agree with the platform’s current performance.
$200M Market Cap Launched on Aave
Lido Finance, a cryptocurrency trading platform, recently launched on aboard of the plane The Lido V3 marketplace version of the platform, specifically designed for Aave, is designed to accommodate Ethereum (stETH) staked in Lido and Ethereum (wstETH) staked in Lido. This will greatly improve the user experience of lending and borrowing stETH and wstETH as it can be fine-tuned to maximize profitability for Aave users.
Lido V3 Market on @ghost Launched 48 hours ago and just crossed $200M in market cap 👻
Here’s what you need to know 👇 pic.twitter.com/aNSGxsq2fy
— Lido (@LidoFinance) July 31, 2024
This helped the price of AAVE recover. The platform also works Experienced Total Value Locked (TVL) is up a massive 10% since yesterday. However, the broader market appears to be going against Aave’s recent bullish trend.
The second quarter revealed some cracks in the lending segment of the decentralized finance (DeFi) space. According to CoinGecko’s Q2 report, researchOver $31.87 billion of TVL is dedicated to lending, representing a significant share of the DeFi pie. However, key DeFi functions such as staking, lending, and cross-chain bridges saw a significant drop in TVL, totaling over $8 billion.
The value that left these sectors reappeared in the form of reinvestment in other platforms or in the underlying trading protocols, which saw a massive 154% increase in total asset value in Q2.
This decline in lending activity has also been reflected in the assets on the platform. Blockanalitica reveal The majority of wallets that hold collateral on Aave are either medium or high risk.
If the market drops by 25%, most of the wallets will be in the red, which represents liquidation. This shows that lending on DeFi is still a risk, especially with the current market volatility we have seen this week.
Short press?
AAVE is currently occupying the range between $93 and $102. This position, although a significant decline from its price levels in June, is a strong support for a potential breakout in the near future.
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However, since it moves independently of the market, this current uptrend may just be a short squeeze or a sudden increase in price before a sharp decline.
Given the current market environment that reflects this volatility, AAVE will struggle to secure its June price level, bringing the potential for further declines.
Featured image by Zerion, chart by TradingView