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AAVE gains capital share in DeFi, yet its prices stall – What’s missing?
In recent times, AAVE has experienced a significant surge in its market value and capital share within the decentralized finance (DeFi) space. Despite this impressive growth, its prices have stalled, leaving investors wondering what might be responsible for this stagnation.
A critical look at the data reveals that AAVE holds 5% of the stablecoin supply, surpassing all centralised finance lenders combined. This remarkable achievement is a testament to the protocol’s commitment to and success in streamlining DeFi operations after the SEC’s DeFi roundtable in the second quarter of this year.
AAVE’s steady growth is not only an indication of growing trust in decentralized lending models but also highlights a fundamental shift in how users, both retail and institutional, are choosing to allocate their capital. It appears that investors have taken notice of AAVE’s resilience and reliability, hence its increased capital share within the DeFi space.
In an unprecedented move, deposits on AAVE were dominated by USDC with a staggering $669 million influx, followed closely by WETH (Wrapped ETH) with $180.3 million in deposits. Conversely, borrowing activity was characterised by a stark contrast, as users opted for USDe and USDT with volumes of $604.5 million and $282.7 million respectively.
This disparity suggests that the demand for stablecoins has taken a significant turn, one that is not yet fully understood or accounted for within AAVE’s current pricing dynamics.
The lacklustre performance of AAVE’s price can be attributed to a liquidity crunch in the order books, as depicted by Coinalyze’s 2-hour chart. This has resulted in an inability for prices to break free from their current range-bound pattern.
In the face of this uncertainty, it is essential that investors and traders alike take heed of these market dynamics and adjust their strategies accordingly.
Source: ambcrypto.com
