Aave Leaves Top 5 Spot on the DeFi Pulse Leaderboard

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Aave Leaves Top 5 Spot on the DeFi Pulse Leaderboard

The most popular lending and borrowing protocol Aave lost almost 18% in collateralized assets today, leaving its spot as a top 5 DeFi project in the process.

While there is no concrete evidence of what might have caused users to remove their liquidity from Aave, experts suspect two possible reasons.

According to data from market aggregator DeFi Pulse, Aave lost 17.7% of its total value locked (TVL) in the last 24 hours. On a closer look, we can see that the number of collateralized assets decreased from $1.58 billion to only $856 million in less than a month.

As a result, the lending protocol dropped from fifth place on the DeFi leaderboard. Now replaced by Compound, Aave is the sixth DeFi protocol with the highest TVL.

It is highly possible that the major drop in liquidity occurred due to the ongoing migration from the LEND token to AAVE. Once the AAVE migration finishes, the protocol will have a governance protocol that is fully secured by new validators.

The migration process started on October 2, which perfectly coincides with the first significant drop in liquidity. Investors may have decided to instantly switch to the new token. Another possibility is that they stopped collateralizing their assets until the process is completed.

The team notes that the old network and LEND token still work during the migration. However, it is highly possible that users are reluctant to participate until they see that the new platform is safe and sound to use.

Did Aave and other DeFi platforms lose collateral due to Bitcoin?

Another highly-probable option is that Bitcoin’s recent swift rise resulted in traders lowering their altcoin exposure. This week, the number one cryptocurrency reached highs that were last seen in July 2019.

Before that, Bitcoin was only this close to the $13,000 range for a few months during the 2017 bull run. Bulls managed to completely outsmart their bear rivals and recover from several bad exchange news in the past two months.

At the time of writing, Bitcoin trades at around $12,800 and might be ready to test resistance at $13,000. However, investors are still uncertain which way prices will finally go as the ongoing PA was highly unexpected.

Now that Bitcoin reclaimed its dominance in the market, investors converted most of their assets into BTC. Since the coin’s dominance went up, the rest of the market suffered as a result.

On that account, most cryptocurrencies have either lost a portion of their value or simply stood still during the move. As a reminder, Aave was the number one DeFi protocol at one point.

The entire DeFi market suffers as well as users lower their exposure to altcoins. Uniswap, Maker, Compound, Aave, and Synthetix have lost a significant portion of their TVL today. The only top 10 DeFi platform that increased in value is WBTC.

Furthermore, we can see that the global collateral for the DeFi market is slowly falling down. The entire market reached a double top at $11.53 billion in TVL. Market data from DeFi Pulse shows that the TVL rate is slowly declining to $11 billion. If the trend continues, Bitcoin’s dominance may mark a temporary pause for decentralized finance.


Marko Mihajlović

Marko is a content writer passionate about cryptocurrencies, blockchain technology, geopolitics, and information security. After an internship at Cointelegraph in 2018, he decided to pursue writing about the field of decentralized technology full-time.

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