Aave (AAVE) is one of the earliest established DeFi initiatives, launched in November 2017. It’s the tenth-largest DeFi project by market capitalisation, according to CoinMarketCap, as of 2 February.
The AAVE token price has been declining since the start of 2022, and hit a 90-day-low of $131.98 on 24 January. At the time of writing (2 February), AAVE was trading at $159.86, down more than 76% from its all-time-high price of $666.86, reached on 18 May 2021.
DeFi Pulse reports that the total value locked (TVL) on DeFi protocols has declined 6.5%, from $86.24bn on 1 January to $80.61bn on 1 February. Aave has seen an even sharper fall, with its TVL decreasing from $11.65bn to $9.93bn, a decline of about 15%.
Can the AAVE token rebound in the coming months? Let’s consider the project’s fundamentals and latest developments to get a clearer view of a plausible AAVE coin price prediction.
What is AAVE coin and how does it work?
Aave is a non-custodial DeFi protocol based on the Ethereum blockchain that lets lenders earn interest on deposits while allowing borrowers to get collateralised or non-collateralised loans. Lenders offer liquidity to the market and earn passive income. Borrowers pay interest.
Aave marks a transition from a decentralised peer-to-peer lending model to a pool-based strategy. Loans are no longer required to be individually matched. Instead, they depend on the pooled money, as well as the amounts borrowed and their collateral. This strategy offers quick loans with parameters dependent on the pool’s present condition.
Users can participate in the Aave system by depositing their preferred crypto and receiving passive income based on market borrowing demand. Deposited assets can also be used as collateral, and any interest earned by making deposits helps balance the interest rate on borrowed funds.
Furthermore, Aave is open-source, enabling anybody to interact with a user interface client (API), or the Ethereum network’s smart contracts directly. Developers can build any third-party service or application.
Interacting with the protocol entails paying transaction fees for using Ethereum Blockchain, which vary according to network state and transaction complexity.
AAVE, the governance and utility token of the Aave Protocol, is used in AAVE Improvement Proposals (AIPs). AAVE can also be staked inside the protocol to ensure security, and users can gain staking rewards.
Aave crypto news and price drivers
The project has undergone a number of significant milestones and developments, which may drive the AAVE coin value.
Integration of Uniswap Markets
Aave Protocol integrated Uniswap Markets in May 2020 to promote DeFi composability and allow holders of Uniswap Liquidity Provider (LP) tokens to borrow funds using their LP tokens as collateral.
Uniswap is a decentralised automated liquidity protocol that enables designers, liquidity providers, and traders to interact in a decentralised financial marketplace.
Aave ecosystem growth: From V2 to V3
In August 2020, Aave protocol released version 2.0, which included various improvements and updates to the protocol’s network capabilities. Adjustments were made to reduce the risk associated with prolonged collateral positions, and V2 also permitted borrowers to exchange their underlying collateral in a user-friendly and gas-efficient manner.
Aave V2 introduced gas optimisations to reduce transaction costs. Additionally, to assure interest rate predictability, borrowers could use a new version of Stable Borrow Rate, which allowed them to lock in their borrowing interest rate for a certain period.
In November 2021, Saver introduced a Request for Comment (ARC) to Governance, seeking community approval for a new iteration of the protocol, Aave V3.
“The design of V3 is poised to create the next generation Layer-0 DeFi protocol that can drastically improve user experience while offering increased capital efficiency, a higher degree of decentralization and further enhanced security,” stated the ARC.
“V3 maintains the core concepts for which the Aave Protocol is known (aTokens, instant liquidity, stable rate borrowing, credit delegation, etc.) while providing new features, which allow users to create new use cases for the Aave Protocol and may spark a new wave of innovation from the community.”
Launch of Aave AMM Market
In March 2021, the Aave Protocol announced the launch of the automated market maker (AMM) Liquidity Pool, allowing liquidity providers such as Uniswap and Balancer to use their LP tokens as collateral on the Aave Protocol.
AMM is the protocol that underpins decentralised exchanges with an independent trading mechanism. This removes the need for centralised financial institutions such as exchanges.
According to the press-release, AMM enabled the community to explore new frontiers and separate risk profiles inside markets, providing more flexibility.
Launch of Aave Arc
In November 2021, Aave Protocol launched Aave Arc, a permissioned lending and liquidity service to help institutions participate in regulation-compliant DeFi initiatives. Participants in Aave Arc gained the ability to supply crypto assets to earn yield or borrow assets against their supplied collateral.
Aave Arc was designed to connect conventional financial institutions with DeFi and to enable them to provide innovative products and services to their users.
AAVE/USD price analysis
According to CoinMarketCap (as of 2 February), AAVE has been one of the strong-performing DeFi coins, delivering a ROI of 31,305 % since its inception.
Based on the earliest available price data from 2020, AAVE was trading at $53.22 on 5 October and closed the year nearly 65% higher at $87.53 as of 31 December 2020.
At the start of 2021, the AAVE token was trending upwards, reaching $529.9 on 12 February. Soon after, the token plummeted to $323.11 and bottomed at $317.5 on 24 April, a 40% decrease from the February high.
The rally resumed, and on 18 May, the AAVE token hit an all-time high of $666.86. However, within a few days after hitting the peak, the AAVE token dropped more than 55% to $295.09 on 18 May and fell further to $186.97 on 26 June.
The price action turned bullish once again for the AAVE token, and it reached $414.59 on 15 September. However, the rally didn’t last, and AAVE fell to $162.42 on 13 December, a slump of nearly 61%. Nevertheless, it closed the year at $255.11, as of 31 December 2021.
AAVE token’s price action was bullish at the start of 2022, reaching a 30-day high of $284.65 on 3 January. However, in conjunction with the market’s prevailing bearish trend, its price continued to fall, reaching a 30-day low of $131.90 on 24 January, a drop of roughly 54% in less than a month. At the time of writing (2 February), AAVE was trading at $159.86, with a market capitalisation of $2.15bn.
Aave (AAVE) price prediction: Targets for 2022, 2023, 2025 and 2030
On 2 February 2022, CoinCodex’s short-term AAVE forecast was neutral, with 13 indicators showing a bullish signal and 13 bearish.
The 3- to -10 daily simple moving averages and exponential moving averages gave ‘buy’ signals, while all the other longer-term MAs and EMAs were bearish. The average directional index (ADX) was also bearish. Still, the volume-weighted moving average (VWMA), the relative strength index (RSI) and the Hull moving average sent ‘buy’ signals.
The stochastic RSI (Stoch RSI), Williams percent range, and the moving average convergence divergence (MACD) kept neutral.
The Aave crypto price prediction from CoinCodex suggested the price could increase 23.86% to reach $197.84 by 7 February 2022.
Algorithm-based forecasters predicted longer-term AAVE future price targets (as of 2 February):
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Wallet Investor shared a bearish Aave price prediction. It predicted the average price could fall to $14.34 by the end of 2022 and $ 4.94 by 2025. The five-year estimate for AAVE/USD indicated that it could decline to $3.63 in January 2027.
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Digital Coin had moderately bullish targets. It estimated the average price of AAVE in 2022 could be $217.71, rising to $252.39 in 2023, $347.88 in 2025 and $678.97 in 2029.
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According to Price Prediction, the average price of AAVE/USD could reach $234.94 in 2022, $348.04 in 2023, $734.68 in 2025 and $4,620.49 in 2030.
When looking for AAVE future price, bear in mind that analysts’ and algorithm-based predictions can be wrong. The AAVE forecasts are based on fundamental and technical studies of the cryptocurrency’s past performance, which offers no guarantee of future results.
It’s essential to do your own research and always remember that your decision to trade depends on your attitude to risk, your expertise in the market, and your investment portfolio spread. You should never invest money that you cannot afford to lose.
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