There are lots of reasons why you might want to invest in Aave (AAVE). Many think that they have to be a savvy investor with lots of capital — but, with some common sense and research, it’s pretty accessible, even for beginners.
Aave or (AAVE) is an Ethereum based token or cryptocurrency developed in 2017 by Stani Kulechov. It runs on a decentralized platform and is a non-custodial money market protocol that allows users to borrow and deposit funds for an interest. Depositors earn interest on their investments while borrowers pay varied interest in cryptocurrencies depending on their borrowing.
The AAVE token has had $622.51 million trading volume in the last 24 hours with the value of tokens transacted standing at $278.23 million according to Coindesk statistics. Its total circulating supply is at about 12.7 million coins, representing about 80% of the total coins.
If you are looking to invest in cryptocurrencies, Aave is one of the altcoins that you could consider adding as part of your portfolio. You can follow the trends in the digital market industry to decide whether to invest in AAVE. Keep in mind that all cryptocurrencies are volatile making them high-risk investment options. Deciding whether to invest or not is dependent on the research you carry out for yourself, and your sheer gut feeling.
The big question you must be asking yourself now is why should you invest in Aave today. We have done some research on this coin, and present to you some reasons to invest in Aave. Keep in mind that these are not foolproof, but a guide to help you make an informed decision.
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17 Reasons Why You Should Invest in AAVE
There are all kinds of reasons why you might want to invest in AAVE — probably some you’ve never considered. Here are 17 that we found.
1. AAVE is The First Crypto Lending System
The Aave ecosystem is the first crypto lending system of its kind. There is always a fortune to earn from pioneers in every industry. While the other cryptocurrencies compete to become means of exchange to replace fiat currency, the Aave ecosystem took a different path to replace the ailing lending system that is mostly oppressive to both borrowers and lenders.
Using the concept of decentralization that brings about unparalleled transparency, you can expect it to grow substantially. A majority of both lenders and borrowers yearn for a system where there is transparency since they can control their funds.
As a pioneer, and with all the benefits it brings to both sets of users, you can expect the token used as the currency on the platform to grow. You can consider this aspect when adding this coin to your portfolio.
2. AAVE has No Middle Men Involved
Unlike the traditional system of borrowing and lending where banks and other financial institutions act as middlemen, there are no such institutions with the Aave lending and borrowing systems. In the traditional financial systems, individuals open accounts where they deposit their money, and then financial institutions lend out this money to borrowers at interest. The financial institution advances very minimal or insignificant interests to the depositors while collecting good profits as interests from the borrowers.
The Aave system, on the other hand, utilizes smart contracts on the Ethereum blockchain. The lack of middlemen in this system enables the borrowers to link directly with the lenders. This direct link-up enables lenders to earn more on their deposits, while the borrowers pay way less than they would when dealing with other financial institutions.
This advantage is possible since the system ideally eliminates the high costs financial institutions imposed on both borrowers and lenders. With such a system in place, the platform is bound to attract more users and in return, help grow the value of this token making it a worthwhile investment.
3. AAVE is Open Access
The developers of the Aave platform went a step ahead to make it as accessible as possible. Anyone anywhere can access this platform and connect to other users either as a lender or a borrower. Unlike select financial institutions such as international banks that only work with institutions and states, the Aave platform is accessible to both retail and institutional investors.
This access will ensure that more investors access the system, and consequently, more money will flow within this system. Since this system is bound to grow over time, you can also expect the value of the token propelling or fuelling the system to grow in equal measure.
The Aave ecosystem is also trustless and permissionless. This means that anyone can lend out their crypto unrestricted and earn interests without having to pay hefty commissions to a third party. Unlike the centralized systems where banks lend out your money and deny you, the rightful portion of the interest made, the Aave platform aims to ensure that lenders get what they deserve, and borrowers are not exploited as they usually are in a centralized system. The interest earned on this platform is paid directly to the lenders' network.
An open-source platform is also more secure than a closed one since many peers are scrutinizing every transaction on the platform. Most investors are bound to go for such a system due to reduced risks and hidden fees if any.
4. AAVE is Non-Custodial Protocol
All banks and traditional financial institutions are custodial trustees. They hold your wealth or funds on your behalf, but use it as they please. You have no control of your funds. If such an institution was to declare bankruptcy, of which several banks have done so since this institution became part of human society, you might as well count your losses. With non-custodial protocols, you retain control of your assets. You also lend them as you please.
Such a system will attract a lot of investors and users as most people like controlling their assets, only that they never get such an opportunity to do so. One trick with strengthening the use of any cryptocurrency is getting it to be trusted by a community of people. Aave token is more than likely going to get this support with such practical use. The more the community grows, the higher this token's value will be.
5. AAVE has A Selection of Assets
In addition to controlling and managing your funds on the Aave network, you also have access to multiple assets that you can invest in and earn extra profit. With Aave, it is not just a matter of buying tokens and speculating, you help other people start their businesses, and earn interest from the same. There are currently 17 varied assets that you can select from if you wish to earn this interest. The system does not limit you to the number of assets you can invest.
In line with investing, there are various fee structures designed to suit any time of an investor, even the one who wishes to invest just a few tokens. You can always switch between these structures as often as you wish, without any restrictions. An investment platform providing such freedom to its investors is bound to grow. Consider investing in the system's token to gain from the same after a while.
6. AAVE is Easy to Use
The founder of the Aave network ensured that all technicalities associated with cryptocurrency platforms did not become part of this network to allow anyone, with or without crypto knowledge to use the platform. Ease of use was his number one priority.
Aave platform developers have tried to make this system as easy as possible for both the lenders and the borrowers. Using the system requires lenders to deposit funds in this network’s liquidity pools. Borrowers on the platform can then borrow or take loans from these pools, but they must first lock a collateral amount that is higher than the amount they wish to borrow. The value of the locked collateral is always in USD.
In a case where this collateral goes below the required threshold, then the system automatically places these assets up for sale or liquidation. Users on the network can then buy these assets at discounted rates, with these funds going back to the liquidity pools. The network funds hence remain positive at all the time, and the lenders can continue enjoying their interests.
Just like the way banks reserve pools to help combat the effects of inflation, the Aave system is the first of its kind to have a liquidity pool reserve funds. Considering the volatile nature of all cryptocurrencies, this reserve pool plays an important role in cushioning investors from volatility effects, just the same way as the reserve in banks cushions against inflation.
7. AAVE Use of Oracles
Since the Aave platform utilizes collateralized assets to keep the network positive and liquid at all times, it has to ensure that the system determines the value of the collateralized assets at all times. In line with this, the Aave network leverages a popular cryptocurrency platform called Chainlink (LINK). This protocol is a decentralized network of oracles or off-chain sensors that link the network to the crypto market.
The sensors can communicate to and from the main blockchain, ensuring that this information is relayed in real-time. This connection minimizes the chances of the Aave network’s collateral losing value without it getting notified. The tokens of investors, thus, remain protected.
With such a system in place, you can consider speculating a few tokens knowing that their value will only be affected by real market forces. Though it can still go down, you can consider having a few with such a secure system.
8. AAVE Flash Loans
Aave network has an interesting system that offers cryptocurrency users and traders flash loans. These are quick loans that do not require a trader to have any collateral. Once a user takes the loan, they must repay it before the next Ethereum block is mined. Users can utilize these loans to carry out quick trades, earn profits and repay the loans in real-time.
Most borrowers use flash loans to arbitrate on trading opportunities. They usually take out these loans and place short-term trades that are high-value or refinance loans on other lending platforms. The Aave network charges just 0.3% for this service and attracts a lot of these borrowers.
If you have invested in the Aave network, you stand to share in the massive revenue collected from this fee, and which is bound to grow with time. The flash loans feature is a good factor to consider when making your decision on whether or not to invest in this token.
9. AAVE has Highly Liquidity Ratio
Liquidity refers to how quickly you can convert an asset, crypto, or otherwise into liquid cash. Even if you have the rarest of items, but are unable to convert that particular item into cash, it might not be as valuable when you need the cash. There are so many cryptocurrencies out there that would take you ages to find a buyer. Such tokens are not worth investing in since you could tie up your cash.
With more than $600 million in trading volume in the last 24 hours at the time of writing this article, it means that a lot of people are buying and selling this token. You can be sure, therefore, that you will not get stuck with unsellable tokens if at all you need to offload them from your portfolio.
With such a high trading volume, it means that you can easily change your Aave tokens to liquid cash, in most cases to USD or any other popular token like bitcoin or Ethereum. All you need is to float these tokens on popular trading exchanges.
10. AAVE has Large Market Capitalization
Market capitalization is the value of a company's stock acquired by multiplying the cost of stock by the number of stocks in supply. In the cryptocurrency industry, you can get the market capitalization of any cryptocurrency by multiplying the number of tokens that are in supply at any one time and multiplying that number with the value of a single token.
The current market price for one Aave token is $329, with a total supply of about12.7 a million tokens. Multiplying the value of one Aave token with the total number of tokens in supply gives a figure of approximately $4.21 billion. It is always good to invest in a token that has a high capitalization.
It is an indication that the coin is highly valued and is actively traded. It is also an indication of a coin’s stability. Even if digital currencies are highly volatile, one with a high market cap will sustain market hits for a longer time as compared to those with a lower market cap value.
11. AAVE has a Limited Supply
An asset, a commodity, or a crypto supply determines its value based on its practical use. Gold for instance is a valuable metal because it has a practical value and because it is scarce. The more scarce a commodity is, coupled with its demand increases its value. In the world of cryptocurrency, the same concept holds. The harder it is to mine a particular coin, the scarcer it will be, and the more value it will have if it has a practical purpose.
Currently, the total number of tokens in supply is 12.78 million. The total amount of tokens that will ever be mined is 16 million. The scarcity of these coins will have a positive effect on its price in the long run, if the network will maintain its practical use.
12. AAVE Average Price per Token
Aave is among the coins whose price is oscillating between $250 and $700. This price is affordable for would-be first-time investors, as compared to buying bitcoin. With $1000, you can buy about three coins. Aave tokens are currently retailing at $325.
Like other digital coins, Aave tokens dropped by about 42% from a high of $661, but are starting to show a bullish trend. According to the current trend, this coin has the potential to hit about $700 or even surpass the $1000 mark in the next year or so. While it is not a guarantee, all analysis points towards that. You could make a few extra dollars by the end of the year if you get a few of these coins.
You can also choose to instead invest as a lender and earn some passive income from the interest accrued from the borrowers.
13. AAVE is Listed in Multiple Exchanges including Binance
Another aspect to consider before investing in any cryptocurrency is the number of crypto exchanges in which it is listed. You also need to consider the reputation of those particular exchanges. Some of the most popular crypto exchanges are Binance, Kraken, Coinbase, and Gemini. A digital coin must be listed on the major crypto exchanges. It means that you can easily buy, sell or trade them.
Aave is listed in more than ten established crypto exchanges. Top among them include Binance, DigiFinex, Gemini, Kraken, and Kukoin among others. Take note that most of these exchanges are centralized, so you should withdraw your coins once you buy them and store them in your private wallet, preferably in cold storage.
The most important factor here though is that the tokens are listed, and thus have a high trading volume. You can buy or sell them as you please. Being listed on many established exchanges makes a coin a worthwhile investment. Additionally, you can buy these tokens directly from the Aave network if you do not wish to use any of the exchanges in which the tokens are listed.
14. AAVE Compatibility with Hardware Wallets
Aave tokens are ERC-20 tokens. That means that they are compatible with most wallets that are compliant with ERC-20 tokens such as MyEtherWallet, Ledger Nano S, and Ledger Nano X. It is important that any token or digital coin you choose to include in your portfolio be compatible with hardware wallets for safe storage.
If you wish to keep the coins for a long time as you wait for the price to go up, you can have some peace of mind knowing that no hacker can access your coin during that time. Aave tokens are compatible with such wallets and thus a good option for long time investment.
15. AAVE Dedicated Developers
Most cryptocurrencies are just pumped and dump projects. They just raise money through initial coin offering then disappear from the market with investors' money after a while, or just stay dormant with any real developments or practical usage.
Aave platform is among the few projects that have shown promising development goals, and seek to improve their network with time to provide even better services. With such projected developments, you can consider staking your money on such as you wait for further growth.
16. AAVE has Fewer Competitors
Aave is one of the few decentralized finance applications providing peer-to-peer lending services. There are so far only a few competitors, yet the market for these services has just be scratched a little. Even with these competitors, Aave is bound to grow considering the features it has on its platform that allow anyone with or without crypto experience to participate or trade on its network.
Aave network has established itself in the market considering its extremely low fees of transactions. Investors or lenders determine their rate of interest when lending their funds. Their interests are paid directly to their wallets with minimal commissions. It is for this reason that the platform has so far outpaced most of its competitors and is bound to continue growing with time.
17. AAVE Runs on Ethereum Network
Ethereum is an open-source platform that allows the development of decentralized applications. It is upon this platform that most decentralized finance applications such as the Aave network are built. Ether is the native digital currency for this particular platform and is currently the second-largest cryptocurrency after bitcoin.
The DeFi developed on this platform can provide a variety of financial services without the need of having third-party intermediaries like banks and other financial institutions.
Being a peer-to-peer platform has given it an edge over centralized institutions and has helped other projects running on the platform grow exponentially. The Aave network is one of the projects that has capitalized on the stability and security of the Ethereum network.
The growth of the Aave network can, thus, be attributed to it being built on the Ethereum platform. With Ethereum showing promising growth possibilities, you can also expect the Aave network to follow the same trend in the long run.
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