DeFi Crash – Is it the end of AAVE?

Updated: 16 June 2022

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The cryptocurrency market is in turmoil right now, with Decentralized Finance continually showing signs of collapse. More than a few leverage positions are now liquidated, and the cryptocurrencies aren’t letting up.

The crypto winter is not just here – it is ravaging the token economy.

DeFi Llama is a Defi TVL Aggregator, providing accurate TVL data further to add credence to the transparency of the crypto market. According to it, the DeFi ecosystem has lost more than 33 billion dollars from TVL, which is fractional considering that it has lost $158 billion since the start of the year.

To get the reference, the value has gone from $236.6 billion at the start of the year to 78 billion USD right now. That equates to $158 billion since January 1^st, 2022.

And the current trends are continued to show depreciation. Currently, the TVL is down by 1.2 percent.

MakerDAO, Curve, and AAVE are seeing losses in double Digits

From the data we fetched from DeFi Llama, the top players and some of the biggest losers have been Maker DAO, Curve, and AAVE

Maker DAO is the protocol behind DAI, a Stablecoin maintaining a 1: 1 peg with USD. Currently, DAI is one of the most stable Stablecoins despite being an algorithmic cryptocurrency.

In the past 24 hours, MakerDAO has grown positively at +1.93%. However, DeFi’s growth is overshadowed by its one-month shortfall of 22.62%.

Curve is a DeFi defined by its USP of low slippage that makes it efficient for Stablecoin trading. However, the current market trends have negatively impacted it, and DeFi lost its TVL by 34% last month alone.

Aave, one of the biggest DeFi Protocols that pioneered the concept, has suffered the most. The current Total Value Locked for AAVE stands at $5.2 billion. Over the past month, it has lost nearly 40% of its total value.

But the community is trying. AAVE, the native token, has risen by 11.54% in the last 24 hours and currently costs $63-$64.

Massive Drop off of AAVE TVL this year

The year hasn’t been kind to DeFi protocols since the beginning. So far, the AAVE token has dived 78%. The reason behind that drop-off is multi-level issues such as exploits, liquidity drain, and a decrease in the value of assets that users pledged as collateral.

The market isn’t putting any confidence in AAVE and other DeFI protocols anymore. And since AAVE is one on which many cryptocurrencies rely on, will it survive 2022.

What is AAVE?

As we already mentioned earlier, AAVE is a DeFi protocol, a decentralized application supported by seven different networks and across 13 different markets.

Major supporters of this protocol include Ethereum, AMM, Fantom, and Polygon, among others. To enable transactions within the network, Aave relies on sAsset. It is a synthetic asset that holds equal value as the original crypto it is derived from.

Users can stake the native governance token, AAVE, to generate passive income. AAVE has grown as one of the premium tokens for yield farming. However, currently, there are only two places where users can stake AAVE: the official dApp or Binance.

Can AAVE die?

The depreciating value locked in the TVL has caused many to ask:

Can AAVE, the pioneer of DeFi, die?

Aave’s primary task is to remove the need for human intermediaries and ensure liquidity for the different tokens that it supports. Because the liquidity the protocols support relies on multiple tokens, it is less likely to collapse.

That being said, AAVE, the protocol’s native token, is witnessing a decreasing value in light of the project’s total value locked. While we have mentioned that the value has seen an increase in the past 24 hours, its overall value has dropped.

The impact won’t collapse the protocol. So, what lies ahead for AAVE amidst this crash?

What lies ahead for AAVE?

DeFi Llama indicates that the market-cap-to-TVL ratio that AAVE currently commands is 0.16 – making AAVE the second most popular DeFi platform.

Furthermore, the Aave leadership has inspired more than enough confidence in the community. Many Twitter users are rallying behind the protocol, applauding its efforts to make the positivity going.

Some have gone as far as to say that if AAVE survives the Bear market, it will become the GoldenBoys of crypto.