24 February 2021 | ZebPay Trade-Desk
Aave was started in 2017 by the name ETHLend, a decentralized project to facilitate services like lending and borrowing using crypto assets. The token involved was then called LEND. Later in 2018-19, during the crypto bear market, there was a lack of liquidity on the platform and the team worked on revamping the platform. Aave is a DeFi protocol that allows traders and investors to lend and borrow crytos. Borrowers typically use their cryptos as collateral to take out flash loans, benefiting from the increased liquidity. On the other hand, lenders earn interest by depositing crypto assets in specifically designed liquidity pools.
Aave Snapshot (at the time of writing):
| Market Capitalization | $3,928,183,499.42 |
| Current Price | $304.59 |
| 24 HR Volume | $924,414,231.89 |
| All Time High/Low | $559.12 / $25.97 |
| Script in Circulation | 12,409,343 AAVE |
| Total Supply | 16,000,000 AAVE |
In early 2020, ETHLend was rebranded as Aave protocol with efficient solutions to address the liquidity problems faced by ETHLend. Along with the protocol, the team introduced the AAVE token, which is the backbone of governance and a security collateral in the protocol. AAVE is the native token used by the Aave protocol. There are several advantages of holding the AAVE token:
- Holders benefit from discounted fees on the platform.
- A key feature of the Aave protocol is that lenders and borrowers can choose between two types of interest rates, stable and variable.
- This is particularly helpful considering the volatile nature of cryptocurrencies. Users can switch between the two types of interest rates anytime.
- Acts as an open source, non custodial protocol allowing borrowers and lenders to seamlessly earn on deposits and earn returns on assets.
- Stakeholders are expected to actively contribute to the development, implementation, and the governance of the protocol.
Moving on, in the investment analysis below we will look at how the ROI on a MoM basis looks for AAVE, proving once again how attainable and attractive the asset looks. In addition, we will also take a brief look at some other ERC 20 compatible tokens in the DeFi space, namely EOS, OMG, TRON, COMP and MKR to understand how AAVE has performed YTD.
Investment Analysis:
AAVE started trading in late 2020, after opening at $52.87, the high it hit was $559.12 appreciating more than 950% within its first few months of launch. The lowest price it has witnessed is $25.97, which was below its ICO price. AAVE has generated a significant amount of interest in the DeFi and has become one of the leading DeFi assets soon after it’s launch.
On the price action front, AAVE has traded bullishly recently and continues to trend upwards. The volatility of the asset has shown although high when compared to traditional assets, is actually comparable when compared to the initial phase of other coins, making it a tradable asset in the short term as well.
| 2020-Oct | 2020-Nov | 2020-Dec | 2021-Jan | 2021-Feb | |
| Avg. Price ($) | 40.71 | 58.55 | 82.93 | 178.61 | 448.10 |
| MoM Returns | – | 43.82% | 41.64% | 115.37% | 150.88% |
As seen in the table above, AAVE shot to fame with its incredible returns from launch. The token held its momentum, before stabilizing towards the end of 2020. However, since recovery, in 2021 the asset has been growing sustainably, and is showing promising signs of maturity in the crypto space.
ERC 20 tokens have shown good resilience and strong ROI’S this year. MKR leads the pack with ~280% return, followed by COMP, at ~160%. AAVE, OMG, TRON and EOS follow suit, and continue to show an upward positive trend. As the DeFi space is rapidly growing, it is likely that these assets will continue to trend positively, and hence it would be safe to maintain a bullish stance. AAVE has shown significant gains in the past few months, and now has achieved a market capitalization of ~$4bn.
AAVE is an interesting offering in the DeFi space as it specializes in being different in the sense that it’s programmable and has a good governance mechanism. The fundamentals of the asset are strong, and the DeFi space has been gaining momentum among investors and traders alike. With that in mind, though AAVE is still a fairly new token, it has proved its merit, and benefited immensely from the growing interest among the crypto community. We believe that AAVE is likely to become a key player in the DeFi space over the next few years.
References:
Disclaimer : This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptocurrencies viz. Bitcoin, Bitcoin Cash, Ethereum etc.are very speculative and are subject to market risks. The analysis by Author is for informational purposes only and should not be treated as investment advice
