Demand for Aave has boomed dramatically in the previous 24 hours as traders assessed its involvement in Bitwise Investment’s upcoming institutionally focused investment vehicle.
The San Francisco-based asset management firm announced Wednesday that it would invest directly in Aave to back its “Bitwise Aave Fund,” a fund created to build a bridge between accredited investors and the emerging decentralized finance (DeFi) sector.
“There is growing demand from financial advisors, hedge funds, institutions, and other professional investors for exposure to the fast-growing DeFi markets,” Matt Hougan, chief information officer of Bitwise, said in a press release, adding that the investment products would simplify access to DeFi markets for professional investors.
The announcement helped to send the bids for Aave higher across spot exchanges. As a result, the DeFi protocol token surged 9.90% to $333.84 and continued its upside momentum heading into the current session.
It established an intraday high of $372.71 on Thursday, a level it last approached on June 9.
Behind the demand
The latest bout of uptrend pushed Aave’s year-to-date gains a little over 320%, asserting its growth in the emerging DeFi sector. In detail, Aave enables users to earn interest rates on deposits and borrow assets with a stable or variable interest rate option.
The protocol also enables “flash loans,” wherein users can borrow funds for ultra-short durations without needing to provide collateral.
Meanwhile, the token Aave (formerly known as LEND) allows the community to govern the protocol’s ecosystem. In doing so, Aave holders can propose, vote and decide on new additions, features and assets to the protocol.
Additionally, a pre-programmed algorithm burns Aave based on the fees earned by the protocol, thereby ensuring that the token remains scarce in the long run.
As a result, the total value locked (TVL) inside the Aave reserve pools has climbed from $519.9 million to $11.2 billion year-over-year, per data provided by DappRadar. The total outstanding loans issued via Aave also have grown 70 times in the previous 12 months.
Ty Young, a researcher at crypto data aggregator Messari, noted that investing in DeFi projects makes more sense for institutional investors than putting capital in Bitcoin (BTC), explaining that protocols like Aave “generate cash flow and have intrinsic value.”
“DeFi tokens’ cash-generating properties allow us to frame discussions about these assets’ worth using traditional valuation methods,” he added.
“As familiar frameworks gain traction and valuation standards coalesce, DeFi assets will gain greater appeal from financial institutions and investors.”
Part of the reason is the dismissive returns on savings offered by the traditional sector.
According to Bankrate.com, the average interest rate on saving accounts in the United States is just 0.06%. Conversely, DeFi projects offer depositors annualized returns anywhere between 1% and 10% — and sometimes even higher — on U.S. dollar-backed stablecoins, such as Tether (USDT), Dai, USD Coin (USDC), etc.
What’s next for Aave?
A strong fundamental backdrop has pushed Aave to new highs, but its ability to continue its uptrend relies on a technical structure.
As spotted by PostXBT, a pseudonymous market analyst, AAVE/USD wants to break above a stern technical resistance level that constitutes an ascending triangle pattern. As long as the pair trades under the said price ceiling, it could face possibilities of a pullback.
Eyes on $AAVE for the daily close…
Close above and we look for the retest to jump in
Close below and we ignore this fake out and remain patient https://t.co/ooAlbIlnli pic.twitter.com/ttX2jkaIfZ— PostyNFT (@PostyXBT) August 5, 2021
Cointelegraph’s VORTECS™ Score also suggested a bullish outlook as price bounced off the $300 mark. The VORTECS™ Score is an algorithmic comparison of historical and current market conditions derived from a combination of data points, including market sentiment, trading volume, recent price movements and Twitter activity.
As seen in the chart above, the VORTECS™ Score for Aave rebounded from 64 (orange) toward 80 (green) on Wednesday, suggesting that more upside is likely.
Aave’s price is currently around $350 at time of publishing.
DeFi Total Value Locked Hit ATH as Crypto Market Sees Resurgence
The decentralized finance (DeFi) ecosystem has printed its highest Total Value Locked (TVL) today, riding on the back of the resurgence in the broader market. Per data from DeFi Llama, the TVL covering all blockchain protocols is now pegged at $223.23 billion, a massive uplift from the $21.4 billion recorded from January 1 this year.
Per the DeFi Llama data, decentralized exchange liquidity pool on Ethereum designed for efficient stablecoin trading, Curve Finance, maintains the largest share of the pie with a value of $17.08 in TVL. Lending protocol, Aave ranks next with a total of $17.02 billion, while Maker also comes off with a total value locked of $15.43 billion. The growth of the DeFi ecosystem has largely maintained an upward trajectory, as more investors, including retail and institutional investors, began leveraging the earning options the emerging protocols that make up the ecosystem offers.
DeFi creates the most direct threat to traditional finance as the emergence of lending protocols for instance has lowered the barrier to entry for accessing loans. Many new investors also find it easy to commit their funds into the DeFi ecosystem as these protocols are governed by smart contracts, which makes them non-susceptible to the lapses of human-fueled organizational management.
Future Growth to be Backed by Mainstream Market
There is a more positive outlook in the broader digital currency industry, fueled by the optimism of approval of the first Bitcoin Futures Exchange Traded Funds (ETF) in the U.S. Per an earlier Coingape report, the ProShares Bitcoin Strategy ETF could be coming as soon as next Monday, October 18, marking an end to the undying anticipation from investors about such a product.
With the advent of the ETF, more funds will be pumped into the entire industry, and there is bound to be a trickle into the DeFi ecosystem. A number of investment managers, including Grayscale, are beginning to provide funds that track the performance of DeFi protocols, opening up additional avenues for more embrace of the DeFi tokens.
Besides the TVL, the tokens of DeFi projects are also seeing an additional boost with all protocols inking a market cap of $137.47 billion according to data from CoinMarketCap.
Report: Driven by DeFi, North America’s crypto volume increased 1,000% year-over-year
Digital analytics firm Chainalysis reported that the growth in North America’s crypto market has been driven by the rise in popularity of decentralized finance.
In its 2021 Geography of Cryptocurrency Report, Chainalysis said the monthly crypto transaction volume across North America grew by more than 1,000% from July 2020 to June 2021. The monthly volume reached a peak of $164 billion in May 2021 before dipping to just over $100 billion in June.
According to Chainalysis’ report, decentralized finance, or DeFi, was largely responsible for North America continuing to maintain its position as one of the largest crypto markets worldwide. DeFi transactions represented 37% of North America’s overall transaction volume from July 2020 to June 2021, with residents sending roughly $276 billion in crypto to platforms in the DeFi space.
The Central, Northern and Western Europe region sent the most in crypto overall — $389 billion, roughly 40% of its overall transaction volume during the same time period. Chainalysis said “DeFi whales” were responsible for turning the region into the world’s biggest cryptocurrency economy, with the majority of institutional-sized transfers going towards platforms in decentralized finance.
However, the report said North America’s DeFi transactions were led by retail investors in the last year, with many transactions under $10,000. Uniswap was the most popular DeFi platform in North America, with users having sent more than $100 billion in transaction volume between July 2020 and June 2021.
“Right now, DeFi is targeted towards crypto insiders,” said dYdX growth lead David Gogel. “It’s people who have been in the industry for a while and have enough funds to experiment with new assets.”
In addition, Eastern Asia’s crypto market has been declining, likely driven by the regulatory crackdowns on China’s crypto industry and mining in the region. Chainalysis reported P2P trade volume in China had dropped significantly over the last year, ranking the country in the 155th position worldwide compared to 53rd the year prior. Though Eastern Asia still received $591 billion in crypto transactions between July 2020 and June 2021 — a growth of 452% year-over-year — the firm labeled the region as the “slowest-growing” in its analysis.
“Mining isn’t the only part of China’s cryptocurrency economy affected by the crackdown,” reported Chainalysis. “The government has taken other actions such as campaigning against cryptocurrency in state-sponsored media, placing official warning messages on cryptocurrency-related apps, and potentially leaning on social media companies to suppress cryptocurrency-related content.”
DeFi Presents Multi-Billion Dollar Use Case To Disrupt Foreign Exchange Market, According to Shark Tank Star Kevin O’Leary
Shark Tank star Kevin O’Leary is saying that the foreign exchange market is a multi-billion dollar use case for decentralized finance (DeFi), a form of blockchain technology that supporters claim can revolutionize financial services by eliminating the need for intermediaries.
During this year’s SALT conference in New York City, O’Leary relates how investors must rely on foreign exchange middlemen to invest in overseas markets. He says the extra steps required in such dealings are often unnecessary and burdensome.
“Let’s say a traditional mandate, such as I want to go long Europe, I’m going to buy 50 stocks. I have to buy Swiss francs, Euro-based stocks and British pounds because I want to trade them on their domestic exchanges.
In between me and that transaction is what’s called the bane of the earth – the FX trader, the currency trader who clips me every time I buy and sell. Adds zero value and sucks friction out of the system. I can’t wait until we solve this problem and give them a new career shining shoes, because they add no value whatsoever.”
The celebrity investor believes that DeFi has the potential to eliminate costly middlemen from the foreign exchange market system.
“This is where DeFi can take us, on just one use case. But it’s a multi-billion-dollar one, and I want to be alive to have a regulator domestically allow me a payment system to a Swiss franc, back and forth if I want to trade it 50 times a day, with zero FX traders. That’s my mission in life, to help them find a real job.”
In May 2020, O’Leary led a $20 million fundraising round for what is now WonderFi Technologies, a Canadian firm that plans to launch a platform to simplify access to DeFi.