AAVE price prediction: What’s next for the DeFi platform?
Aave’s token price and platform usage surged as DeFi adoption grew, but a sustained bear market has throttled trading prices
- What is Aave (AAVE)?
- From the Aave whitepaper
- Aave’s price history
- Surge in price and users
- AAVE price prediction
Over the past three years, Aave (ticker: AAVE) has established itself as one of the go-to protocols for decentralised crypto loans. Aave has proved to be an active platform that is continually being developed and improved.
Aave allows its users to borrow and lend multiple different cryptocurrencies via a range of different services. Many lenders are locking in their crypto, making Aave one of the six largest decentralised finance (DeFI) projects, according to DeFi Llama. The AAVE token provides holders with discounted fees on the platform, as well as serving as a governance token.
Before diving into an AAVE price prediction, let us first ask: how does Aave work?
What is Aave (AAVE)?
Back in 2017, the London-based entrepreneur Stani Kulechov, who has a Master of Laws degree from the University of Helsinki, was frustrated with the lack of lending applications on Ethereum, so decided to make his own.
ETHLend was created to allow users to lend and borrow Ether (ETH). But as the project branched into different cryptocurrencies, the name was no longer fitting. Kulechov rebranded the project as Aave in September 2018.
Aave is a Finnish word that translates to ‘ghost’ in English, representing the platform’s mission to create a transparent, open infrastructure for decentralised finance (DeFi).
Aave incentivises its users to lock cryptocurrencies into liquidity pools by providing interest. Borrowers can withdraw from the pool but must provide a larger amount of collateral. Thus, the overcollateralisation is a provision of collateral that is worth more than enough to cover potential losses in cases of default.
There are ways to borrow from Aave without collateral. Users can take out a flash loan, which provides a cryptocurrency that must be returned within the span of a block. Borrowers can use a flash loan to profit from the varying prices offered at different exchanges.
For those wondering ‘What is Aave coin used for?’ the token was designed to ensure this process is as efficient and accessible as possible. AAVE holders can vote on updates to the protocol, such as the parameters of the markets and the management of its reserve funds.
From the Aave whitepaper
The whitepaper states: “The birth of the Aave Protocol marks Aave’s shift from a decentralised P2P lending strategy (direct loan relationship between lenders and borrowers, like in ETHLend) to a pool-based strategy. Lenders provide liquidity by depositing cryptocurrencies in a pool contract.
“Simultaneously, in the same contract, the pooled funds can be borrowed by placing a collateral. Loans do not need to be individually matched, instead they rely on the pooled funds, as well as the amounts borrowed and their collateral. This enables instant loans with characteristics based on the state of the pool.”
Now the foundational principles backing this protocol have been covered, let’s take a look at the coin’s history, and what forecasters predict might happen to the coin in the future.
Aave’s price history
ETHlend held its initial coin offering in November 2017, and raised $16.2m through the sale of one billion LEND tokens, a rate of $0.01 per token. These were ERC-20 tokens with a deflationary tokenomics system. Tokens would be used as collateral in an event of a shortfall.
In July 2020, almost two years after the rebrand, Aave announced it was holding a token swap. The 1.3 billion LEND tokens could be exchanged for the new AAVE coins, with 100 LEND swapped for 1 AAVE.
The timing of this swap worked in Aave’s favour, as it took place during the DeFi summer of 2020, which saw Aave become the fourth-largest DeFi platform by total value locked into the protocol.
The price of AAVE in October 2020 stayed around the $50 mark, but it began to see some action towards the end of the year. By 31 December 2020, AAVE had climbed to $87. This came as it released a new version of its protocol, with features that made it more efficient and flexible. Borrowers could change the collateral in a user-friendly way that was low in fees.
Surge in price and users
AAVE continued to grow as 2021 began, passing the $100 barrier in the first few days of January and rocketing to $506 on 5 February 2021. This momentum had been growing as more users flocked to Aave’s lending platform. It was also suddenly receiving lots of flattering press about its protocol.
CoinDesk reported that Aave was the second-largest DeFi project on Ethereum, with more than $3bn total value locked. CityAM reported a rumour that entrepreneur Mark Cuban was holding the cryptocurrency. The Insider ran an interview with cryptocurrency investor Mike Novogratz, CEO of Galaxy Investment Partners, who said the Aave platform could replace the New York Stock Exchange.
Even though the Aave cryptocurrency did correct after the surge to $500, momentum was still with it. Aave had become one of the most used lending platforms by total loan value, and activity continued to increase. In April, the network had adapted Polygon into its platform, a scalable Ethereum sidechain. By the end of the month, Aave had seen more than $1bn liquidity locked in via Polygon.
The AAVE price saw a resurgence at the end of April and started climbing again. On 18 May 2021, AAVE reached its all-time high of $666.86. But it was unable to sustain this valuation, and five days later had fallen to $295.
Over the following months, AAVE saw a few spikes. At the beginning of August, it climbed past the $400 mark for the first time since May. This came after Bitwise Investments added a fund for the decentralised finance token.
AAVE saw another surge past $400 on 15 September 2021, the day Aave’s community voted on whether the lending protocol should be deployed on the Avalanche blockchain. Aave voters agreed on the proposal and it was deployed on 4 October.
The price of the AAVE coin has since dropped well below $300, but there is plenty to look forward to. According to AMBCrypto, AAVE has revealed plans to increase the scalability and userbase of its platform in 2022. It is also releasing its own mobile wallet app this year.
Aave started off the year making headlines. It launched a permissioned DeFi liquidity pool for institutions wanting to get involved in decentralised finance. Named Aave Arc, it is designed to be compliant with financial regulations, including anti-money laundering and know-your-customer verification.
Between January and March 2022, the coin was on a steep downtrend. By 8 March, the coin was trading at $122.05, its lowest in over six months, and standing at just 17% of its all-time high. However, brighter news was ahead and on 16 March 2022, AAVE announced its new V3. Dubbed “the most powerful version of the Aave Protocol to date, V3 brings groundbreaking new features that span from increased capital efficiency to enhanced decentralisation.”
On 31 March 2022, the coin closed at $206.28. The crypto market had shown fleeting signs of a recovery in the beginning of the second quarter of 2022, and AAVE generally moved in tandem with the general sentiment.
However, flash crashes towards the end of the second quarter spooked the crypto market, causing the coin to plummet to further lows of $45.98 on 18 June 2022. After showing some positive price movement towards the end of June, the token has been showing signs of life.
Aave also addressed a governance proposal for the launch of GHO, the platform’s own stablecoin, prompting another surge in usage in early July:
As a result of the banning of Tornado Cash in the US, Aave, along with Uniswap, Balancer, Oasis and Ren, has banned wallets which have interacted with Tornado Cash, following the OFAC sanctions. Aave also banned Tron founder Justin Sun after he received a Tornado Cash ETH payment, also known as a ‘dusting attack’.
Although the Aave protocol is complying with the new regulations by implementing TRM Labs’ API, the long-term impact of sanctioning smart contracts could have wide-reaching repercussions for DeFi and the blockchain industry.
As of 16 August, the token is trading at $109.36, and making a steady ascent from the lows recorded in June.
Could developments within the AAVE protocol lead to a more positive AAVE price prediction?
AAVE price prediction
FXLeaders gives a very optimistic price prediction. It says the growing adoption of decentralised finance and AAVE’s unique flash loans make a compelling reason for AAVE’s userbase to grow over the coming years. Its AAVE price prediction for 2022 is between $700 and $750. The site does warn, however, that any security breach in Aave “could shake investor confidence, and the price of the token could fall as a result”.
Not all are as hopeful over AAVE’s future price. WalletInvestor has called it a “bad long-term investment” and forecasts the lending token will fall to around $10.80 by the end of 2022.
DigitalCoinPrice’s AAVE coin price prediction forecasts steady growth for the lending token. The site's AAVE price prediction for 2022 suggests an average price of $152.36 in September 2022, but $146.49 in December. It estimates it will grow to an average of $161.95 in 2023 and $184.85 in 2024. The site also makes an AAVE price prediction for 2025 of $216.26, and an AAVE price prediction for 2030 of $506.23.
Critics, including CoinBureau and Binance, have raised concerns over the decentralised loans that Aave offers. The over-collateralisation aspect, locking in more than you are borrowing, means there are few real-world applications aside from ‘DeFi magic’. But this is a criticism of DeFi rather than Aave. The lending platform has even recognised that it is for the crypto community, and positioned itself in that way.
Aave has proved there is a substantial niche for DeFi loans, and its protocol is an industry leader. Even though the token price has settled over the past few months, experts have recognised its 2022 plans could result in an exciting year for the lending platform.
Is AAVE a good investment?
It could be. 2022 is looking like it will be another exciting year for Aave, as it has plans to make its protocol more flexible and release a mobile wallet app. This, combined with the growing DeFi adoption, has led FX Leaders to make a bullish AAVE price prediction. However, its volatility could act against investors, so you should always do your own research.
AAVE is available on most crypto exchanges. Take a look and see which one has the best deal for you. Remember only to invest what you can afford to lose, and bear in mind that prices can go down as well as up.
Will AAVE go up?
It might do, or it might not. Some AAVE price predictions expect the lending token to rise over the coming years, but not all forecasters agree. DigitalCoinPrice, for instance, believes AAVE will pass the $500 mark within the decade, while WalletInvestor expects the token to lose most of its value over the coming years.
Remember, cryptocurrencies are highly volatile and you should never invest more than you can afford to lose.
Should I invest in AAVE?
It depends. The Aave token is primarily used for governance, meaning it could be worth investing in if you want to have a say in votes on the lending platform. The price of its token is expected to rise by most price predictions, but not all are hopeful for AAVE.
You should always do your own research before investing in any cryptocurrency.