Is It Worth Investing in Aave?

Last Updated October 15th 2021
18 Min Read

While mainstream finance has its own benefits, there are a few flaws that make decentralization the better option. That is why the DeFi industry is growing fast as people begin to realize what it really means to have control over their finances. 

Aave is one of the DeFi protocols that picked up on the decentralization craze. The protocol runs on the Etherum platform, which allows users to create and control their projects. 

Aave is a protocol that provides a platform for lending and borrowing cryptocurrencies between its users. Whilst most exchanges offer only the buying and selling of cryptocurrency, Aave tries to beat banks in their lending game. In fact, decentralized lending marketplaces like Aave slowly defining how banks operate.

Its unconditional lending platform is decentralised and open-source. Their loans are instant, and unlike mainstream loans, don’t consider things like credit history, ability to pay or personal identification information. With Aave, you forget about the traditional know your customer (KYC) and anti-money laundering (AML) restrictions. 

To run its operations, Aave uses its native token known as AAVE. Unlike Bitcoin and Ethereum, which are mined, AAVE is earned by buying on exchange platforms and is staked or locked in its lending protocol.

This guide takes a look at how to Invest in Aave and its unique features. To better understand Aave, we’ll need to look at it as a protocol and as a token.

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Contents:

What is AAVE?

AAVE is a decentralized network for borrowing and lending cryptocurrency. It brings together lenders and borrowers and allows them to create a peer-to-peer lending market. 

Aave was launched in November 2017 and was initially known as ETHLand. It was later renamed Aave in 2020. While Aave supports many cryptocurrencies, it also has its own native token known as AAVE, which is mostly used for in-house operations. 

Let’s look more at the AAVE token below. 

What is the AAVE Token? 

AAVE is an ERC-20 token that powers the Aave platform and runs on the Ethereum blockchain. The AAVE token is earned by either depositing in pools through loans or buying it directly from exchanges. You can then store your tokens in any Ethereum friendly wallets or lock them in the pool for other people to borrow. 

As a holder of the Aave token, you have several advantages. For instance, you get voting rights which gives you a say in the future of the company. Additionally, you can stake and earn interest from the borrowers’ interests, or you can use them as collateral to borrow other cryptocurrencies.

invest in aave

How Aave Protocol Works 

You can easily buy AAVE in the market, then stake it in the protocol and get powers to control the way things are run. For example, you get the right to vote, just like in the case of stock ownership. 

Aave allows investors to earn interest through the provision of loans. Here, lenders earn interest by having tokens in a pool, whereas borrowers provide cryptocurrency as collateral. The collateral is locked, and one can borrow up to 50% of the amount locked. 

The Aave protocol has several key features. These include:

  • aTokens: These are tokens that earn interest in a situation where you borrow and use them as collateral. When you deposit tokens, they are minted, and on redemption, they are burned. The interest earned accrue directly to depositors or borrowers. aTokens are leveraged on the ratio of 1:1 to the value of the underlying asset. The Aave protocol is non-custodial in nature, which means that you can freely store, trade or transfer your cryptocurrency. Aave’s protocol provides a borrower with various cryptocurrencies without actually owning them. 
  • Credit Delegation: If you are eligible but not interested in a loan, you may delegate the credit line to another person. This is the same as being a guarantor to a loan. If you have a credit line, you can access funds from Credit Delegation Vault then sign agreements through OpenLaw.
  • Rate Switching: This is a concept that protects borrowers from changes in interest rates. You can switch between fixed and variable interest rates options. By using fixed rates, you are sure of the amount to repay. Variable rates could be high or low depending on the market forces. You can switch rates anytime you wish without limitations. 
  • Trading Functionalities: You can still trade on deposited cryptocurrencies that you are using as collateral. This way, you are assured of making money on your coins in case you don’t secure a loan. Such an arrangement is unheard of in the traditional banking sector. The advantage is that both the lender and borrower benefits. 
  • Governance: AAVE holders participate in governance by voting on what changes should be implemented. You can still delegate your votes to other users by transferring your tokens.
  • Flash loans: Aave provides short term instant loans without collateral to developers. The principal loan must be repaid in a single Ethereum transaction. 

Read Also: Is Aave A Good Investment And Should I Invest In AAVE?

Aave Price Predictions 

To be able to predict the future growth trajectory of the Aave protocol, we will first need to look at its price history. Aave is still new, having been introduced into the market in 2017. Therefore, historical trends are not adequate to form a concrete prediction of its future price. This may be the cause of the extreme price differences amongst various price analysts.

Aave floated its Initial Coins Offerings (ICOs) in 2017 and raised $16.2Million. Its value has been rising since 2020, when its price was going for $53.49. The highest ever recorded price of Aave was $559.12 on February 10, 2021. 

The token started trading at a high price of $55.11 at the beginning of October 2020 and closed the month at a low of $32.9. The highest value recorded during the month was $57.8 and a low of $25.

In November, Aave reached highs of $82.17 and lows of $27.70. There was significant growth in December 2020, where the coin went as high as $96.06 with a yearly low of $63.60.

In 2021, Aave joined the market-wide bull run and went above $660 in May. In July the price dropped to $187 but since then hasn't been below $200 and currently, Aave is trading around $300.

Aave Price Predictions for 2021-2024

It is almost impossible to predict the future prices of volatile assets. The price changes in minutes, and you have to be super fast to keep up. We can use forecasts provided by expert analysts as per the sources below:

Longforecast anticipates a fall in price in AAVE value to $260 in December 2021. In January 2022, Aave is set to record $317 and close the year with $532. January 2023 will witness an increase to $660 and close the year at $1263. Longforecast predicts prices of $1148 in January 2024 before a slump to $1034 in December 2024.

Digitalcoin platform is hopeful that December 2021 will witness a price of $428 for Aave coin before increasing to $624 in 2023 and crowning it at a high note of $926 by 2025. Digitalcoin gives Aave a positive outlook by predicting that its value would triple by 2025. This implies a profitable investment. 

TradingBeasts expect Aave to turn around its fortunes after the recent crash. Going by their linear and regression analysis, TradingBeasts’ prediction is not far off the mark given Longforecast and Digitalcoin predictions. 

TradingBeasts predicts Aave to trade at $362 at the end of the year 2021, which splits the centre of Longforecast value of $260 and Digitalcoin’s $428. TradingBeasts prediction of $380-$500 between 2022 to 2024 is way more pessimistic than Longforecast’s and Digitalcoin’s.

Wallet Investor predicts an astronomically high price of $1,800 in 2026 and cast faith on Aave as good for long-run investment. Wallet Investor foresees that Aave price could reach $492 by the end of December 2021. It predicts the value of AAVE to reach $730 by the end of 2022. Whereas other predictors cast low values, Wallet Investor foresees a constant rise of Aave to astronomical heights.

Coin price forecast predicts Aave to attain $329 by the end of 2021 and is expected to hit $1,000 mid-2025. Coin price forecast predicts that Aave will be worth $1,500 in 2027. Coin price forecast predictions of 2021 and 2022 go in tandem with both Digitalcoin and Longforecast predictions. 

Previsioni Bitcoin suggests a bullish momentum, with Aave reaching highs of $742 by December 2021. 

Generally speaking, we get a clue that the price of AAVE is likely to rise through to 2026. Despite fluctuations anticipated along the coming years, most predictors see a future rise in the value of Aave from the year 2022 onwards. The signals are highly favourable, and one is advised to invest in Aave for long term gains.

Read More: Aave Price Predictions

invest in aave

How to Invest in AAVE

You can start your investment journey in Aave through the following process:

  1. Opening an Online Account 
  2. Buying a Wallet
  3. Purchasing Tokens

Opening an Online Account 

Your first action in this journey is to look for a broker. The broker provides a platform that supports buying and selling of Aave. Several brokers are available to offer such service, but services vary depending on your location and currency required. 

To sign up for the online account, you must provide a valid email address, create a username and password. You can fortify your account by using two-factor authentication. 

On completion of account opening, you need to verify your account. You are requested to provide additional identification documents and confirm your email address and phone numbers.

Buying a Wallet

A wallet is where you store Aave, just like a bank account. There exist several wallets, each with its own benefits. Aave can be stored in any wallet so long as it is compatible with ERC-20, such as MyEtherWallet (MEW) and MyCrypto. 

Choosing a crypto wallet for Aave depends on your needs. If you are into long-term hodling then go for hardware wallets such as Ledger Nano S or Ledger Nano X . Mobile and web wallets, on the other hand, are easy to use and good for short-term holding. 

Now that you have a wallet, the next course of action is to fund this wallet.

Purchasing Your First Tokens 

Upon setting up a wallet, you must fund your account then place an order to buy from the open market. You must buy through a trusted and secure agent. Before buying, decide on the number of units you require and the pricing.

The first step is to place your order. The type of order to place is dictated by the current market price. The type of order is dependent on the exchange platform you are using. While placing your order, you indicate how many tokens you need and the maximum price you are willing to pay for each token.

Once you place your order, sit back and relax and leave the rest to your broker. The broker will act guided by your instructions. If the purchase is successful, the tokens will be deposited in your account, and you will be able to see the balance in your exchange wallet. On the other hand, if the order was not successful, it is either cancelled immediately or left open for some time.

Now that you have tokens, what next? Your reason for investing in Aave will guide your next actions. If your main motivation is profits, then you can begin trading immediately. If you are into a long-term investment, then no further action is needed immediately. Just wait and hope that the prices will continue rising.

invest in aave

Ways to Invest in AAVE 

Though reasons for investing in Aave vary among individuals, the bottom line is the profit motive. To attain this depends on what you do with your cryptocurrency. Aave presents a lot of opportunities to grab and profit from.

As a  holder of the Aave token, you have a chance to influence changes to the network. You can control Aave’s future by exercising your right to vote. This, of course, depends on the worth of Aave that you hold.

You can invest in Aave in two different ways:

Method 1: Buying for long-term Investment

Here, you buy tokens HODL and wait for its value to rise, then sell at a later date when its price goes up. Your tokens will be earning interest from loans as you wait. This is the standard method that is not involving, and anyone can practice.

Method 2: Trading for Short-term Gains

If you are into cryptocurrency for trading purposes, then you need resources to monitor the prices on a regular basis. You need to be fast and observant to succeed. This is because of change in prices within short periods. Through luck and experience, you can make money. However, this method requires experience and predictive tools to guide you. You may employ the use of trading bots to handle your trades. 

The Future of Aave

Traditional lenders are laden with bureaucratic approval structures and loads of paperwork. The entire process is slow and time-consuming.  Aave has been successful as a decentralized alternative to mainstream lenders. It provides instant loans with fewer requirements and no paperwork. 

Aave platform provides an alternative to those who want to lend or borrow without relying on traditional financial institutions. Unlike banks, the interest earned from lending is added to your wallet. 

You are likely to witness increased recognition and more government control on DeFi platforms in the near future. 

Check Out: Could Aave Be A Millionaire-Maker Coin?

Why Should You Invest in Aave?

The future of decentralized Finance is so bright that other stakeholders, including banks, are mulling the possibility of entering. 

Aave operates without middlemen. The decentralized platform removes the barriers of middlemen and bureaucracy. The traditional paperwork and perceived hidden charges by banks are eliminated by open-source systems. 

The responsibility to govern the protocol is given to Aave holders. Aave offers incentives to users of its protocol. Holders of Aave tokens are given autonomy to manage risks and get rewards. You can take part in voting for changes to the platform.

Aave’s holders are entrusted with the security of the governing protocol. Since security is entrusted to interested parties with a stake to guard, the protocol is deemed safe and transparent.

Don't Miss: Pros and Cons of Investing in Aave

Is Aave a Good Investment?

Decentralized finance space is threatening to blow out the traditional way of operations. In fact, many establishments such as banks and gaming companies are beginning to realize the importance of decentralisation. The following are three reasons why Aave is a good investment.

1.Crypto Loans is a new concept

Aave entry into the DeFi space got many investors by surprise. What with fast loan approval, high lending rates, and collateral value which was equivalent to the loan amount. Most crypto companies desire quick liquidity to leverage on buy and sell orders instantaneously. Such companies will go for the DeFi industry for their quick orders. 

Furthermore, investors are attracted to growing businesses rather than the established entities. Thus a growing business attracts investor goodwill. Aave has a stable platform that is still growing and improving, thus attracting those who want to invest in the companies of the future.

2. Aave has a Bright Future

Its prices reflect an upward trend which is forecasted to earn profits. In fact, Aave pioneered the concept of cryptocurrency lending and borrowing. With a market capitalization of $5 billion, Aave sits at position 26 of the largest cryptocurrency by market capitalization. Aave’s use of the concept of liquidity pool reserves ensures that the lenders’ funds are available in case they want 5o pull out. 

Read Also: 17 Reasons Why You Should Invest in AAVE Today

Conclusion: So, Should I Buy Aave?

Your journey to invest or not in Aave is informed by the performance of the crypto since inception and future prospects. Look at the price trends and what the experts predict. Guided by this article, it is prudent to carry out further research before you invest. 

Going by the trends in price fluctuations, it is wise to buy AAVE for long term investment. This, of course, requires that you have sitting funds not needed in the short run. Most investors HODL, cryptocurrency slang for buying and holding for long-term as you wait for prices to hit your ceiling. 

If the current events are anything to go by, then you might want to tread carefully. Cryptocurrency is highly volatile, with daily sharp changes in prices being witnessed. Since the companies are recovering from recent turmoil, it’s time you take advantage of low prices and buy for the long term.

Your decision should also be guided by external factors which affect cryptocurrencies, such as news announcements and the influence of financial markets. Your choice should also be informed by government regulations which may limit or bank its use.

Decentralized finance has the potential to become the norm in future. Most companies, including Microsoft, are embracing the open-source idea. This is a good sign that big companies have realized the importance of the open-source concept. 

You may take advantage of Aave’s idea of pooling funds to cushion lenders. This setup guarantees the safety of your investment and ensures the availability of funds should you wish to withdraw. Such measures should guide your decision to invest or not.

The common adage is to invest what you can afford to lose. Do your research and consider long term investment. With Aave, you can be earning commission and interest on loans while your portfolio’s prices continue to rise. 

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