AAVE price prediction: What’s next for the DeFi platform?

Aave’s token price and platform usage has surged as DeFi adoption continues to grow

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Over the past three years, Aave has established itself as one of the go-to protocols for decentralised crypto loans. Aave has shown to be an active platform that is continually being developed and improved. It is looking like this will not change in 2022.

Aave allows its users to borrow and lend 31 different cryptocurrencies via a range of different services. Many lenders are locking in their crypto, making Aave one of the five largest decentralised finance (DeFI) projects, according to DeFi Llama.

Before diving into the optimistic AAVE price predictions, let us first look at how Aave works.

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 and open infrastructure for decentralised finance.

Aave incentivises users to lock cryptocurrencies into liquidity pools by providing interest. Borrowers can withdraw from the pool but must provide a larger amount of collateral. The overcollateralisation may seem unappealing, but it is mainly used to profit off a cryptocurrency’s volatility.

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 managing of its reserve funds.

Aave’s price history

ETHlend held its initial coin offering in November 2017, which raised $16.2m (£13.2m) through the sales 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 leaned in Aave’s favour as it was 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, AAVE had climbed to $87. This came as it released a new version of its protocol, with features making 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. 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. City AM reported the rumour that entrepreneur Mark Cuban was holding the cryptocurrency. The Insider ran an interview with the 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, AAVE reached its all-time high of $666.86. 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 the 15 September, 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 dropped below $300 since the proposal and is sitting at $215 at the time of writing. 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 has already started the year off making headlines. It launched a permissioned DeFi liquidity pool for institutions wanting to get involved in decentralised finance. Named Aeve Arc, it is designed to be compliant with regulations, including anti-money laundering and know-your-customer verification.

Could its 2022 plans lead to a hopeful AAVE price prediction?

AAVE price prediction

FX Leaders has a very optimistic price prediction but has good reason behind it. It says that 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. FX Leaders forecasts an AAVE coin price prediction for 2025 of between $1,500 and $2,500.

The site does warn that if there is a security breach in Aave, it “could shake investor confidence and the price of the token could fall as a result.”

Not all are hopeful over AAVE’s future price. WalletInvestor has called it a bad long-term investment and predicts the token will soon lose most of its worth. It forecasts that the lending token will fall below $100 by the end of 2022 and its AAVE price prediction for 2025 is around the $20 mark.

DigitalCoin’s AAVE coin price prediction forecasts steady growth for the lending token, however. It estimates it will grow to $346 in 2023 and $447 in 2025. Its AAVE price prediction for 2029 is close to the $1,000 mark.

Out of all the forecasts, PricePrediction offers the most bullish. It estimates AAVE will pass the $1,000 barrier in 2026. Its AAVE price prediction for 2030 is a staggering $5,436.34.

Critics, including CoinBureau and Binance, have raised concerns over the decentralised loans that Aave offers. The overcollateralisation 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.

FAQs

It could be. It is looking to 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.

It might do. The majority of AAVE price predictions expect the lending token to rise over the coming years, but they vary on the increase rate. PricePrediction forecasts AAVE to climb to $5,436 in 2030 while DigitalCoin thinks it will not pass $1,000 by 2029. Meanwhile, WalletInvestor expects AAVE to lose most of its value over the coming years. Remember, you should never invest more than you can afford to lose.

It depends. The Aave token is primarily used for govenance, meaning it could be worth investing 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 a cryptocurrency as the prices can be very volatile.  

Further reading

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