AAVE is not only one of the most popular DeFi coins behind a decentralized lending platform.
This article takes an in-depth look at Aave, its core areas of business, and - most importantly for prospective investors - the pros and cons which can help answer the question: Should You Buy AAVE?
AAVE has been a crypto trading asset since October 2020. After appearing on top cryptocurrency exchanges, AAVE has gone on to surpass expectations and reach $666.86 in May 2021. For decentralized finance and blockchain enthusiasts, cryptocurrency day traders, growth and value investors, AAVE may be the missing digital asset that could erase irrecoverable losses from a thriving portfolio of investments.
You may have been asking questions such as, is investing in AAVE a good idea, is it worth investing in AAVE, can AAVE make me rich, and should I invest in AAVE? Although there are no straightforward answers to those questions, AAVE is likely a great investment that could bring you gains you never thought possible. Depending on the level of risk you are willing to take and the amount of time you can put into conducting independent research, AAVE may just be the right investment for you.
Mainstream cryptocurrencies such as Dogecoin, Bitcoin, Litecoin, Bitcoin Cash, Ether, and DASH are integrated with millions of merchants online as a transactional currency. AAVE on the other hand is a new cryptocurrency that serves as a governance token responsible for overseeing upgrades and important changes to its native protocol, Aave.
This is the primary reason why blockchain analysts and even mainstream financial analysts believe Aave and other decentralized lending platforms can compete fair and square with centralized finance institutions.
As a DeFi coin that brought huge returns to investors in 2021, will Aave coin explode? With the rising nature of decentralized finance and more people being educated on the subject, will AAVE surpass BTC’s price and market capitalization in the future?
Most importantly, for novice traders and investors - what are the pros and cons which can help answer the question; should I buy AAVE?
If you want to buy Aave (AAVE) quickly and easily, check out eToro!
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
- Aave at a Glance
- PROS of Buying AAVE
- CONS of Buying AAVE
- How to Invest in AAVE / What is the Safest Way to Buy AAVE?
- AAVE Price Prediction: How Much Could Aave Coin Be Worth?
- The Bottom Line - Should You Buy AAVE?
Aave At A Glance
Let's take a look the Aave Protocol, the inception of the project, its founders, the primary reason why it was created and the price history of AAVE.
Stani Kulechov is the founder of Aave. Before the protocol was called Aave, it was first known as ETHLend. Kulechov wanted to expand ETHLend so that his company to be open to providing a wide range of services such as blockchain-based games, custody & payment services, development tools and ambient accounts, a name change ensued and ETHLend became Aave.
Stani Kulechov, like other software developers, decided to take advantage of Bitcoin as a first-mover of blockchain technology and Ethereum’s smart contract network and build a lending platform that would directly compete with centralized institutions without the bureaucracies.
The project comprises Aave, Aave Protocol, and AAVE. Aave is a company that consists of cryptographers, computer and software engineers that ensure the smooth functioning of the platform. Aave Protocol is an open-source and non-custodial liquidity protocol that allows deposits of 17 Ethereum-supported tokens such as Synthetix USD (SUSD), 0x (ZRX), Wrapped Bitcoin (WBTC), Tether (USDT), USD Coin (USDC), TrueUSD (TUSD), Synthetix (SNX), Augur (REP), Maker (MKR), Decentraland (MANA), Chainlink (LINK), Aave (LEND), Kyber Network (KNC), Ethereum (ETH), Dai (DAI), and Basic Attention Token (BAT).
AAVE is the cryptocurrency of the network. It is properly termed as a governance token due to its role in managing the Aave Protocol.
What is Aave?
Aave is a decentralized money market that runs on the blockchain of Ethereum and enables users to lend and borrow a range of crypto assets. Aave can also be defined as a decentralized lending system that allows users to lend, borrow and earn interest on crypto assets, without any intermediaries (investment and commercial banks).
How does Aave Work? Decentralized finance enthusiasts who have huge sums of money to spare deposit liquidity to the market to earn a passive income. With such liquidity in the pool, users can borrow 17 cryptocurrencies earlier on outlined in exchange for paying a variable interest rate.
Aave is normally credited as the first decentralized finance innovation. According to CoinMarketCap, Stani Kulechov’s project was built before the existence of decentralized finance.
Read Also: Could Aave Be A Millionaire-Maker Coin?
What Was Aave Created?
Aave was created out of frustration after founder Stani Kulechov couldn’t find a lot of lending applications on the Ethereum Network. Having already built a system that had not seen light, the founder decided to launch the project due to the control centralized financial institutions have on private citizens with regards to our lending and borrowing activities.
With a focus on the huge amount of time wasted before a loan can be processed, Aave was created to come into a fragmented and complicated system by simplifying the facilitation of loans within a short period. Choosing from 17 Ethereum-supported tokens, flash loans, and other forms of loans with an extended period can be obtained without paperwork or a list of signatories.
At the time of writing, Aave protocol leads "deposited in lending" with a total of $5,447,101,755 which is followed by MakerDAOd in 2nd place ($3,265,719,607) and Compoun in 3rd place.
This means that Aave’s quest of providing a lending resource to its customers has proved crucial to the survival of users who thrive on the protocol to earn passive income.
How Many Aave Coins Are In Supply?
Currently, AAVE has a circulating supply of 14,093,192.58 AAVE from a total and maximum supply of 16,000,000. This means 88% of AAVE has been mined with 12% left up for grabs.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
AAVE Price Performance in 2020
As per data retrieved from CoinMarketCap, AAVE appeared on cryptocurrency exchanges and brokerages on 2nd October 2020. Since that day, the cryptocurrency has experienced sharp rises in bullish days and sharp declines in bearish seasons.
AAVE tested its strength and reached a high of $0.52 on its opening day. AAVE started building momentum concerning investor interest. Volume crossed the $1 million price milestone for the first time on 8th October. AAVE experienced sharp sell-offs by traders and investors who decided to cash in on the newness of the cryptocurrency. The digital asset closed on 31st October 2020 at $29.71 with an impressive day volume of $58.6 million.
AAVE closed in November with a trading price of $76.42. In the process, traders and investors that purchased AAVE at the start of the month walked away with 157.22% returns in just 29 days.
The month of December brought joy to numerous Americans and global investors as all kinds of assets saw a price rise. Driven by the distribution of the second wave of stimulus checks, more liquidity was thrown into digital assets and AAVE was one of the primary beneficiaries. AAVE opened at $76.42 on 1st December 2020. With average trading volumes of $200 million daily, AAVE closed on 15th December at $87.26. AAVE exchanged hands rapidly with holders setting new prices for the cryptocurrency. On the whole, it maintained its trading volumes which were reflected in its price. On 31st December 2020, AAVE closed at $87.53, had a trading volume of $204 million, and a market capitalization of $1,053,210,331. Based on its opening and closing prices for 2020, AAVE returned 16,732.7% for investors.
AAVE Price Performance in 2021
The year 2021 was tagged as the decentralized finance year. There was the rallying of digital assets to new all-time highs which could not be forecasted by crypto analysts and experts. Based on AAVEs returns for 2020, millions of people joined the crypto boom of 2021. AAVE, like most altcoins, followed Bitcoin’s patterns by thriving on the digital gold’s first mover advantage to make strides in gains.
AAVE opened at $87.54 on 1st January 2021, tested an intraday high of $90.35 which was also its closing price. Crossing $500 and $600 million for the first time, AAVE opened on 15th January 2021 at $147.33 and closed at $162.58. Towards the end of January 2021, AAVE tested $800 & $900 million and $1 billion for the first time. Eventually, such huge investor demand in the novel token powering the decentralized lending protocol opened at $313.89 on 31st January 2021, reached an intraday high of $317.19, and closed at $300.06.
On 1st February 2021, AAVE opened at $300.04 and with BTC crossing $40,000 and seeing huge institutional investment, AAVE crossed $400 and $500 for the first time on 4th February 2021. With a spike in investor interests which floated between $500 million and $1 billion, the crypto trading asset experienced sell-offs and corrected to a price of $344.87 by the end of February.
In March, AAVE left off where it finished in February. A huge announcement of a new company (Tesla) accepting BTC as payments paved the way for altcoins such as AAVE to head north. AAVE retested $400 in the middle of the month and maintained its price to trade for $377.01 by the close of March.
In April, AAVE succumbed to a bearish outlook due to a crypto ban by Turkey and the Treasury Department announcing a crackdown of financial companies which use digital assets as a haven for money laundering purposes. AAVE opened at $377.18 on 1st April and plunged to a new low of $292.78 on 18th April. Traders and investors bought the dips and AAVE soared to $444.73 to end April.
In May, AAVE gained a new exchange listing in the form of eToro and a new partner in WIREX. The new alliances could not prevent AAVE from going down due to the delisting of BTC by Tesla and China reaffirming its stance on banning all forms of digital assets in the country. AAVE opened at $444.87 and closed the month at $383.08. AAVE reached an all-time high of $666.86 on 18th May. It dropped afterwards but started recovering again in August, to reach the $415 mark in September again and close 2021 with a price of $255.11.
AAVE Price Performance in 2022
In the first months of 2022, Aave was trading between $115 and $255. Then in May, the price started dropping down following the bear crypto market and it hit a low of $54 in June. At the time of writing, it had a trading price of $84 and a market capitalization of $1.18 billion.
The question on the minds of crypto enthusiasts is what are the pros and cons of investing in AAVE that support such a spike in price?
Pros Of Buying AAVE
What are the benefits of Investing in AAVE?
The advent of decentralized finance has brought new platforms into the digital lending space. This has made it difficult to sort genuine platforms from fake decentralized lending protocols. This is the main reason why you should know the pros of investing in AAVE concerning its features before deciding on the asset. Let us take a look at the pros of buying AAVE.
✅ Aave Relies on a Pool Approach
When AAVE was first introduced in November 2017 as ETHLend, founder Stani Kulechov relied on a peer-to-peer (P2P) form of decentralized lending. In the long run, this model affected the efficiency of the Aave Protocol.
As a result, after its rebranding from ETHLend to Aave, it decided against continuing with the P2P model that other decentralized lending platforms rely on which focuses on individual depositors to power loans and employ a pool approach.
Under this, users who want to provide liquidity to the protocol deposit amounts of money which are categorized under different pools which come with different interest rates. High liquidity providers get the highest interest rates which are followed by medium rates for medium liquidity providers and low-interest rates for low liquidity providers.
This has proved beneficial to the platform and is the main reason why Aave is among the top three decentralized finance platforms with the most amount of money deposited for lending. This has made up for liquidity shortages earlier on associated with ETHLend.
But how does this affect AAVEs price? Traders and investors thrive on the positivity of the issuing authority of a cryptocurrency to make investment decisions. With Aave Protocol not having any weaknesses concerning the lending services it provides users, more investors have placed their hopes in AAVE due to the stability and positive press it garners on social media platforms.
Liquidity Pools mean thousands of users can find any amount of money for the urgent family and business needs. This in turn reflects positively in the trading volume (investor interests) in the cryptocurrency and the market capitalization of AAVE in the short and long term.
✅ Aave Relies on Safety Module during Times of Liquidity Shortages
The Safety Module is the primary mechanism for securing the Aave Protocol in terms of constant liquidity. AAVE Holders are incentivized to lock tokens into a smart contract-based component. In the case of a shortfall event, the locked AAVE will be used as a mitigation tool within the money markets that are in the ecosystem of Aave.
What is a shortfall event? This is where the number of borrower requests far and wide exceeds the amount of money in all liquidity pools. How does the Safety Module rectify a shortfall event? According to information retrieved from Aavenomics “In the instance of a shortfall event, parts of the locked AAVE are auctioned on the market to be sold against the assets needed to mitigate the occurred deficit.” But won’t the safety module lead to an excess flow of AAVE in the open market which can hurt the value of AAVE? The team behind the project has a built-in backstop mechanism to prevent the excess flow of the cryptocurrency so that the value of AAVE on the open market will be maintained. Overall, the participants of the Safety Module receive rewards in the form of fee distributions and Safety Incentives for using their liquidity to secure the protocol against an unbalanced lender and borrower ratio.
So, how does this affect the price of AAVE? Safety Module prioritizes the scarcity of AAVE on the platform so that it wouldn’t lose its value. As a trader or investor, one of the questions several potential investors ask is, how would Aave Protocol deal with not being able to fulfill the demand for loans if all possibilities were used? You can be rest assured that Aave has a future.
You can invest in AAVE with the view to a secured network as a result of AAVE holders taking the necessary steps to ensure the continuity of the lending protocol in the short and long term. This could see AAVE retest its all-time high of $666.86 and reach new price milestones in the future.
✅ AAVE Continues to Record Impressive Trade Volumes
Volume analysis is very important in technical analysis because it is a measure of the strength of a market indicator. AAVE has had improved volumes over its trading history.
At the start of its trading journey, AAVE traded at fractions of cents, and pence. AAVE finally recorded a trading volume of $583,091 on 6th October 2020. The volumes surpassed $1 million in the early days of October. Increased investor interest saw trade volume increase to $50 million. The $60 million and $70 million milestones were surpassed in the days leading up to the end of the month. By the end of October, investor interest had taken the market capitalization of AAVE to $333.5 million.
Thriving on the decentralized finance boom of 2021, AAVE tested $500 and $600 million in volumes within a short period in January 2021. Investor interest in the digital asset did not wane as AAVE ended January after testing $1 billion in volume and having a market capitalization of more than $3 billion. On 18th May, AAVEs all-time high price took the digital asset’s market capitalization to $8.06 billion with a trading volume of more than $2 billion.
This means that there is a high level of interest in the cryptocurrency. Since liquidity is one the most essential elements in gauging opportunities in the market as well as a collective expression of the opinion of traders, AAVE’s numbers certify the digital asset as an attractive investment.
✅ Aave Has One of the Best Teams in the Decentralized Finance Space
Having a great team behind a project is extremely crucial to its survival. Aave is based in London and has more than 20 employees around the globe.
Headed by CEO Stani Kulechov and Chief Operating Officer (COO), Lazaro Gustave, Aave has two great people who have learned from their experience at ETHLend when they employed a P2P model instead of a liquidity pool. Aside from the two, the team is built on an eclectic admixture of creative directors, tech evangelists, software engineers, risk managers, and other professionals from diverse fields and other decentralized finance-related areas of expertise.
This team facilitated features such as flash loans and safety modules. In terms of partnerships, they ensured collaboration with WIREX and other digital entities. In the future, investors can be rest assured that they are going to take into account the opinions of AAVE holders through votes and improve the efficiency of the protocol for beginners who have few complaints here and there.
This team will continue to usher out innovative decentralized products that will pour more liquidity onto the protocol and cryptocurrency.
✅ Aave Is Extremely Safe
Aave as a decentralized platform can be used with an Ethereum wallet. Since it runs as an ERC20 token, most of the transactions are subjected to the features of Ethereum. This makes it safe to use.
This is because a hacker may have to buy more application-specific integrated circuits (ASICS) to take over a network. This is attributed to the high carbon emissions associated with Ethereum’s use of the proof-of-work (POW) algorithm that ensures the security of a blockchain network.
With Ethereum becoming fully functional on its proof-of-stake (POS) network, a hacker may need to own a substantial amount of Ether (ETH) before they can break into the system. Ether is 18 times the price of AAVE. Holding more than 50% of Ether sums up into billions of dollars which is almost impossible for a hacker whose primary motive is to make money. Therefore, AAVE is safe to use.
✅ Aave Provides Competitive Interest Rates
Without competitive rates, lenders will abandon the system and find other decentralized lending platforms. AAVE has the highest amount of total value locked which has exceeded $5.4 billion, as per data retrieved from DeFilLlama. This amount wouldn’t be thrown into a platform if it wasn’t offering lenders and borrowers a good rate on which they can transact on. This keeps the activity on the protocol intact and increases activity on the cryptocurrency on exchanges.
✅ AAVE Is Easily Accessible
No trader or investor will like to include a digital asset that does not have mileage. AAVE trades on eToro, Binance, Huobi Global, FTX, CoinTiger, and a host of cryptocurrency exchanges. Cumulatively, there are more than 100 million users on these exchanges. This sum is synonymous with the total numbers that hold crypto wallets globally. AAVE will continue to see more investor interest due to its visibility in the market.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Cons Of Buying AAVE
What are the disadvantages of investing in AAVE?
Do not follow social media feeds from hedge fund managers and options traders who entice people to invest in cryptocurrencies by looking only at the positives. No crypto trading asset is perfect. Let us take a look at the cons of investing in AAVE that will alert you that potential investment may be at risk of being lost.
❌ Depositing Small Amounts Can Cost You More than Rewards You Earn
Due to Ethereum’s gas fees and most oftentimes, the low-interest rates provided by Aave due to having so much money in its liquidity pool, low liquidity lenders may suffer huge losses by depositing money. Few people have complained about this. Aave cannot be blamed since it thrives extensively on Ethereum to scale. Once there is high user activity on its network, transaction fees go up due to the network’s inability to scale more transactions in a short period.
❌ Can Plummet to New Lows on the Back of Major Regulation
AAVE is trading around $84 which is less than 87% of its all-time high. The future of digital assets largely remains unknown.
With the pressure on numerous regulatory bodies to take action on the back of scams and shady schemes raking millions of dollars for perpetrators, there can be some form of regulations on the use of cryptocurrencies in the future. Although it would be difficult to control decentralized finance due to cloud hosting and database centers scattered around the globe, the impact could be felt in digital assets such as AAVE since its issuing authority (Aave Protocol) competes with centralized finance institutions for customers.
❌ Infinite Competition from Major Rivals
The Aave Protocol is not the sole decentralized platform on the planet. Aside from DeFi lending platforms on Ethereum, other decentralized applications are planning on taking over decentralized finance. According to Sanbase, Polkadot and Kusama led developer activity in the last 30 days with 521.13, followed by Cardano. Ethereum is in 10th place with 267.23.
The development team behind Aave must be active or may have to succumb to its position as one of the top DeFi platforms to up-and-coming decentralized lending protocols.
❌ The Launch of Central Bank Digital Currencies Can Hurt AAVEs Price
After China launched a Digital Yuan to compete with decentralized currencies, the Bahamas followed suit. In the past months, Sweden, Indonesia, Norway, Japan, South Korea, Kenya, South Africa, Ghana, Egypt, and Morocco are exploring the technology’s feasibility. One of the markets CBDCs aims to break into is the unbanked population.
The unbanked population is unable to take advantage of passive income opportunities such as interest rates from lending to the government in the forms of bills and bonds. Since such digital currencies would be backed by an authority that billions of people can trust, this could prove detrimental to the course of creating a decentralized lending network where citizens have control over lending and borrowing activities.
In the long run, the dominance of CBDCs may see AAVE and governance tokens of other DeFi lending platforms plunge and with time plummet to irrecoverable zones.
Read More: Pros and Cons of Investing in Aave
How To Invest In AAVE / What Is The Safest Way To Buy AAVE?
Several exchanges can help you invest in AAVE. Fortunately, eToro has listed AAVE for trading and long-term investing. You can trust eToro as it is one of the pioneer exchanges in the world and not the new exchanges that came into the system to take advantage of the boom in decentralized finance.
To begin investing in AAVE, kindly follow the steps below.
The first step is to SIGN UP for AN ACCOUNT. Details of your full legal name, phone number, residential, and email address are highly essential in setting up an account.
The second step is to VERIFY YOUR ACCOUNT. A government-issued identification card with your signature embossed will be requested to confirm not only the identity but the humanity of the person sitting behind their personal computer or smartphone. For traders and investors from the developing world, a request for your residential address via bank and credit card statements will increase the verification process.
The third step is DEPOSIT FUNDS. Through a range of payment options, you can upload funds in USD, EUR, and GBP.
The last step is to NAVIGATE to the AAVE PAGE. On this page, you can purchase Aave coins that meet your budget.
AAVE Price Prediction: How Much Could Aave Coin Be Worth?
Several price forecasts have been made across CryptoNewsZ, Digital Coin Price, Coin Price Forecast, and Long Forecast. Most of the forecasts provide answers to questions such as, how much can AAVE be worth by the end of 2022, how much will AAVE be worth in 2025 and how much will AAVE be worth by the end of 2030?
According to experts at CryptoNewsZ, AAVE could have a trading price of $181 by the year’s end of 2022. The crypto website estimates that in the long term AAVE could command average prices of $224 and $241 by the end of 2023 and 2024. CryptoNewsZ forecasts a price of $335 by the close of 2025.
According to experts at Digital Coin Price, AAVE could trade for a coin at $103 by the end of 2022. The crypto news and prediction website that makes predictions using technical analysis projects AAVE to command trading prices of $153 by the close of 2023, $195 (2024), $238 (2025), and $330 (2028). Digital Coin Price believes AAVE could have trading prices of $397 (2029) and $485 (2030).
According to analysts at Coin Price Forecast, AAVE could command trading prices of $96 by the end of 2022, and close 2023 at a trading price of $161. In the long term, AAVE is estimated to reach prices of $188 (2025), $352 (2029), $392 (2030) and $411 (2032).
Based on the price forecasts, you can deduce AAVE could trade for at least $300 in the not-too-distant future.
Don't Miss: Aave Price Predictions
The Bottom Line - Should You Buy AAVE?
AAVE is a digital asset worth your consideration in terms of buying due to the enormous potential it presents in this saturated market. Investments in the short and long term boil down to certain factors and the two most important are risks and rewards. You should always ask, do the potential risks of investing in Aave exceed the possible consequences of buying AAVE?
Aave certainly has some risk factors such as infinite competition from DeFi lending rivals and a major crackdown on cryptocurrencies which could lead to a drop in its value. A possible rollout of central bank digital currencies could be on the cards in the next few years with many countries conducting feasibility studies on its potential in the market.
With that said, Aave is more than just a decentralized lending platform. It’s a technology company with innovative products under its belt. It’s got a great team behind its cryptocurrency and a feature called Safety Module which ensures the protocol’s safety as well as continuity through a balanced lender and borrower ratio.
So, is it worth investing in AAVE? Due to its relatively lower price, AAVE is a buy. Due to the unpredictable nature of cryptocurrencies, we would urge you to use our research as a supporting thesis after you have conducted independent research that emboldens you to make an investment decision on AAVE. For traders and investors who believed in the possibilities of AAVE, a return of 20,778% has befallen them. If it worked for them, who knows, AAVE may be the missing digital asset in your investment portfolio to bring enormous gains.
eToro – The Best Platform To Buy Aave
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Is AAVE A Millionaire Maker?
AAVE could become a millionaire maker. This depends on the number of AAVE coins you can buy and a projected price forecast that can lead you to your investment goals. Due to the partnerships and innovative products being provided by Aave, it’s a mainstay and one of the top DeFi coins that could become a millionaire-maker coin.
How Much Could AAVE Be Worth in 2030?
According to Coin Price Forecast, AAVE could reach $392 by the end of 2030.