DeFi Protocol AAVE Hits All-Time High as Weeks-Long Rally Continues 

While traditional cryptocurrencies are still struggling to get another bull run started, the decentralized finance (DeFi) space is forging ahead. Top lending protocol Aave token reached a new milestone as its in-house token marked a new all-time high.

Metrics Pointing Up for AAVE

According to data from Coinmarketcap, the AAVE token reached an all-time high of $288 earlier today, marking another high point in what has been a week-long rally. While the asset has so far fallen back below the $280 mark, AAVE remains a strong pick for investors and should hit the milestone again.

Considering that AAVE began the year trading at $83, this price ally has been a significant one by all accounts.

The rally has been due in part to the asset’s growing total value locked (TVL), which hit $2 billion at the start of the year. The lending protocol is now the second-largest DeFi protocol by assets locked, with $3.8 billion in TVL.

AAVE has also enjoyed a rise in staking demands, with investors now staking 26 percent of the token’s entire circulatory supply. Apparently, the chance to earn 56.1 percent in annual yields is too juicy for many to pass up.

A Good Time to Invest in DeFi

So far, AAVE is just one of the many DeFi protocols posting impressive numbers. The entire space has continued to surge despite lags from large-cap cryptos like Bitcoin and Ether for the past few weeks.

The DeFi pace had a stellar 2020, with TVL for the entire industry rising from about $2 billion at the start of the year to over $22 billion. It has continued on this trajectory, with DeFi Pulse data showing that TVL has reached an all-time high of $26.5 billion.

DeFi protocols are especially unique because of their cash-flow generating structure. This means that the platforms have small fees that they can use to fund their treasuries or compensate liquidity providers. Due to the quick-growing user base and their increasing cash flow, many of these protocols appear to be in a “re-rating moment.” 

Speaking on the state of the industry, Santiago Santos, a partner at DeFi-focused fund ParaFi, said in a tweet that several of these protocols are experiencing “re-ratings” as they creep into the top 20 crypto rankings.

DeFi protocols creeping up the top 20 is a key re-rating moment. As stupid as it may seem, it's like being on page 1 of Google search results.

So far, DeFi has captured limited mindshare. It's <5% of total crypto market cap. Yet, it has the most usage, innovation & fundamentals.

— Santiago R Santos | #9159 (@santiagoroel) January 12, 2021

Santos explained that most traditional cryptos had found it challenging to be as capital-efficient as DeFi tokens. With their quick growth and profitability, the market is poised to grow to greater heights. 

“Watch as we go through a fundamental re-rating of DeFi protocols. Point to any other asset class that is as high growth, profitable, and capital efficient as DeFi? I’ll wait,” Santos said.