AAVE, the native governance token of the Aave credit protocol, is up over 50% on the past day. The rally comes as the entire DeFi market is rallying big due to an overall increased appetite for the sector.
Aave’s 30-minute price chart. Source: AAVEUSD on TradingView.com
Why are DeFi and Aave gathering?
The DeFi market has become more attractive to both retail and institutional investors.
Institutions are interested in DeFi because many DeFi projects have actual cash flow. This makes DeFi protocols comparable to traditional companies using traditional scoring models.
Of course, as aggregate demand for DeFi increases, two large subsectors are growing rapidly: lending and oracles.
Lending platforms like Compound and Aave have seen sharp spikes in user activity and credit volume, which has driven their respective ratings soaring.
Santiment analysts noted that the number of AAVE whales increased significantly over the past month. This is an indication that high net worth investors continue to amass aave.
The analysts stated:
“#DeFi is alive and well in #Crypto, as $ AAVE rose to +33% growth last day. # Aave whales, whose addresses we believe hold 1,000 tokens or more (~ USD 397,000 + USD) rose from 266 to 327 addresses in the past month, fueling this rally. “
The continued accumulation of AAVE by whales and high net worth investors, particularly in the US, appears to be causing the price of AAVE to rise.
Will whales buy at a high price too?
AAVE’s market cap is currently over $ 5 billion. Aside from Chainlink, which some consider a DeFi token, no other DeFi protocol has previously hit a market cap of $ 5 billion.
Although Aave’s market cap is quite high at $ 5 billion, investors believe Aave will remain the dominant DeFi credit protocol.
If it does, and DeFi’s total value drifts towards $ 40 billion, Aave is more likely to reach a rating that will allow it to become one of the top ten cryptocurrencies.
Arthur Cheong, founder of Defiance Capital, the largest DeFi-focused fund in Asia, said it was likely that Aave would become more valuable than any European fintech startup by 2022.
I think it’s likely that $ Aave will be more valuable than any European fintech startup by 2022. https://t.co/DS96JkMr86
– Arthur (@ Arthur_0x) February 3, 2021
High-profile wealthy investors also talked about Aave last week. Billionaire investor Mark Cuban announced in a Reddit post that he owns the DeFi token, which many found surprising since it came from a longtime cryptocurrency skeptic.
This shows that DeFi is no longer crypto-native and has piqued the interest of the mainstream as well as investors from traditional finance.
Analysts often say that traditional financial investors find DeFi more attractive than Bitcoin because they can understand the cash flow aspect of DeFi.
In the long term, this could help increase the overall growth of the DeFi market and the attractiveness of DeFi systems as an installation.
For more information, see More DeFi Coins on CryptoSlate.
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