Aave Reignites Bullish Trend as the Market Undergoes a Reset

The platform's native token, AAVE, surged nearly 20% in the past 24 hours, riding the wave of the broader market that has seen a more than 5% increase since yesterday.

Crypto lending protocol Aave (CRYPTO: AAVE) has seen a renewed surge in its bullish trend as the broader market undergoes a reset.

What Happened: Aave’s native token, AAVE, saw a surge of nearly 20% in the past 24 hours. This comes as the broader market has seen an increase of more than 5% since Thursday.

Recent developments on Aave have played a role in this rally. Lido Finance, a crypto staking platform, integrated its Lido V3 market instance into Aave.

This new feature, designed specifically for Aave, is tailored to handle Lido’s staked Ethereum (stETH) and wrapped staked Ethereum (wstETH). The integration is expected to enhance user experience in lending and borrowing these assets, offering more fine-tuned profitability for Aave users.

Lido announced the milestone on social media, noting, “The Lido V3 market on @aave has been live for 48 hours and just crossed $200m in market size.”

AAVE’s price has recovered as a result. The platform has also seen a total value locked (TVL) increase of nearly 10% since Thursday.

However, the broader market’s reaction to Aave’s bullishness remains to be seen.

CoinGecko’s 2nd Quarter research pointed out vulnerabilities within the lending sector of decentralized finance (DeFi).

Over $31.87 billion in TVL is dedicated to lending, yet the core functions of DeFi, such as staking, lending, and cross-chain bridges, saw a significant decrease in TVL, to the tune of $8 billion.

The value migrated from these sectors returned through restaking in other platforms or basis trading protocols, which experienced a dramatic 154% increase in TVL during the second quarter.

Aave assets are also impacted by the decreased lending activity. According to Blockanalitica, the majority of wallets holding collateral on Aave are classified as either medium or high risk.

If the market were to drop by 25%, the majority of these wallets would be in the red, leading to potential liquidations. This highlights the risky nature of lending on DeFi, especially given the market volatility observed this week.

AAVE’s market cap is currently valued at $1.4 billion. The token has been trading in a range between $93 and $102. Despite being a significant drop from its June price levels, this range could provide support for a possible breakout in the near future.

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Why It Matters: Aave has been a major player in the DeFi space, offering a range of lending and borrowing services. The platform’s performance is closely watched by traders and investors alike.

Aave’s recent bullish trend could be a sign of optimism returning to the crypto market after an extended period of bearishness.

However, it’s important to note that the market could still be volatile, and traders should exercise caution before making any trades.

AAVE might struggle to reclaim its June price levels, given the market downturn, raising the possibility of further declines ahead.

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