Aave rises by 50%: what’s behind the meteorite rally?

AAVE, the native governance mark of the Aave credit protocol, rose over 50% on the past day. The rally comes as the entire DeFi market sees a major rally due to an overall increased appetite for the sector.

aaveAave’s 30 Minute Price Chart. Source: AAVEUSD on TradingView.com

Why are DeFi and Aave gathering?

The DeFi market has become more popular with both private and institutional investors.

Institutions are interested in DeFi because many DeFi projects have actual cash flow. This makes DeFi protocols comparable to traditional companies using traditional scoring models.

Of course, as aggregate demand for DeFi increases, two large subsectors are growing rapidly: loans and oracles.

Loan platforms like Compound and Aave saw large increases in user activity and credit volume, which greatly increased their respective ratings.

Santiment analysts noted that the number of AAVE whales has increased significantly over the past month. This suggests that wealthy investors will continue to accumulate Aave.

The analysts stated:

“#DeFi is alive and well in #crypto as $ AAVE rose to + 33% last day. #Aave whales, which we believe contain addresses of 1,000 tokens or more (~ USD 397,000 + USD), rose from 266 to 327 addresses in the past month, fueling this rally. “

The continued accumulation of AAVE by whales and high net worth investors, particularly in the US, appears to be driving the price of AAVE up.

Do whales buy even if their ratings are high

Currently, AAVE’s market capitalization is over $ 5 billion. Aside from Chainlink, which some consider a DeFi token, no other DeFi protocol has previously hit a market cap of $ 5 billion.

Although Aave’s market cap is quite high at $ 5 billion, investors believe Aave will remain the dominant DeFi credit protocol.

If the total value locked in DeFi moves towards $ 40 billion, the likelihood of Aave reaching a rating that allows it to become one of the top ten cryptocurrencies increases massively.

Arthur Cheong, founder of Defiance Capital, the largest DeFi-focused fund in Asia, said it was likely that Aave would become more valuable than any European fintech startup by 2022.

I think it’s likely that $ Aave will be more valuable than any European fintech startup by 2022. Https://t.co/DS96JkMr86

– Arthur (@ Arthur_0x) February 3, 2021

High-profile wealthy investors also talked about Aave last week. Billionaire Mark Cuban announced on a Reddit post that he owns the DeFi token, which many found surprising from a longtime cryptocurrency skeptic.

This shows that DeFi is no longer crypto-native and has piqued the interest of the mainstream as well as investors from the traditional financial sector.

Analysts often say that traditional financial investors find DeFi more attractive than Bitcoin because they can understand the cash flow aspect of DeFi.

In the long run, this could help fuel the overall growth of the DeFi market and the attractiveness of DeFi assets as investments.

For more information, see DeFi Coins in CryptoSlate.

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