Aave Token Outperforms Market with 45% Price Gain

Proposals to revamp AAVE’s tokenomics and the protocol’s risk management have increased investor interest in the coin, observers confirm. According to Arca head of research Katie Talati, the proposal, dubbed “Umbrella,” could ease selling pressure on AAVE in the market.

AAVE, the native token of decentralized crypto lending platform Aave, has surged more than 45 percent in four weeks to $135, outpacing all of the top 100 cryptocurrencies by market cap, including leaders bitcoin (BTC) and ether (ETH). Helium’s HNT token is a distant second with a 26 percent price increase, according to data from CoinGecko.

AAVE’s price rally began in late July, when Marc Zeller, founder of the Aave-Chan Initiative, proposed a fee switch to distribute a portion of the platform’s excess revenue to critical actors in the ecosystem and purchase tokens from the secondary market.

“There is speculation that AAVE could enable ‘fee switching’ to redistribute excess revenue generated by the platform to stakers. This follows a proposal by the platform to use excess revenue to purchase tokens and redistribute them to AAVE stakers and producers of GHO stablecoins,” Joshua de Vos, head of research at London-based digital asset data and index provider CCData, told CoinDesk.

This has increased market sentiment around the project and opens up the possibility of new incentives for holding and staking AAVE, Vos said.

Another proposal envisions replacing the “seize and sell” loan liquidation process, which negatively impacts the AAVE price, with a “seize and burn” mechanism with AAVE’s GHO stablecoin and aTokens representing assets deposited into the protocol.

According to Katie Talati, head of research at Arca, this so-called “Umbrella” proposal could ease the selling pressure on AAVE in the market. “The proposal aims to create a new system, Umbrella, that would use a variety of assets to cover ‘bad debt’ in the protocol, rather than just the AAVE token. The new system would therefore somewhat ease the selling pressure on AAVE,” Talati said in late July.

Web3 agency Deelabs noted in a statement on X that the buybacks would create persistent upward pressure on the market and eliminate the negative impacts on the AAVE price during Umbrella’s loan liquidations: “This is just scratching the surface of the proposal. There is much more to this proposal.”

These proposals, which aim to revamp AAVE’s tokenomics and the protocol’s risk management, have increased institutional interest, according to algorithmic trading firm Wintermute. “The tokenomics update discussion brought increased attention to the protocol in July, and it is widely seen as a ‘blue chip’ defi asset that follows the growth of crypto. Additionally, large funds have been allocated and research notes have been prepared for its investors,” Wintermute said.

Aave also stands out as the protocol that generated the most revenue and fees over the past four weeks. According to data tracked by TokenTerminal, Aave generated more than $27 million in fees, outpacing other lending and borrowing protocols.

For this reason, some in the crypto community still believe the token is undervalued.