Aave (AAVE) has solidified its position in the top 40 of crypto assets. The Ethereum (ETH) expansion led to a recovery in lending. Aave is once again attracting whales at levels not seen since 2022. 

Aave activity is increasing with this year’s bull market. As with other assets and protocols, Aave benefitted from the inflow of stablecoins and the rise of ETH market prices. 

The latest upward leg for the crypto market also helped Aave recover its value locked to levels not seen since the 2021 bull rally. Aave now locks in more than $20B in liquidity, turning into the largest lending protocol after months of rebuilding. Aave is also considered one of the most undervalued protocols, with a market cap of $3.53B, just a fraction of the value carried in its lending vaults. 

Over the course of 2024, Aave successfully replaced the unwinding of Maker and turned into one of the key sources of yield. Even Donald Trump’s protocol, World Liberty Financial, planned to build an instance of Aave for its own share of liquidity. 

Aave had a slow return during this phase of the bull market, as the protocol was cautious about contagion and vetted its collateral assets. The real expansion of Aave started in October, with more sustainably high borrow volumes and growth of collaterals. USDC was the most borrowed asset, for its multiple applications in yield or trading. 

AAVE broke into the top 40 tokens

AAVE broke into the top 40 after a 40% growth in the past week. The asset tracked closely the trend among altcoins, which have gone through accumulation for months. AAVE traded at $235.60, close to its 2022 range from before the bear market. 

The token traded near its yearly peak, with the highest volumes in the year to date. Open interest for AAVE expanded to a three-year peak above $171M, with a 70% prevalence of long positions. The open interest is much smaller compared even to meme tokens. AAVE is making a return after 900 days of accumulation and is yet to attract short-term traders. 

Trading for AAVE is split among exchanges, thus forgoing concentrated pumps on Binance. This led to a more gradual growth for the token until now, when the official altcoin market was announced. 

From 2025 onward, Aave will start unlocking its ecosystem reserve. Currently, AAVE tokens are more than 81% unlocked and have overcome the years of selling. The 2025 unlocks will be gradual, and will go toward ecosystem incentives. 

From this range, AAVE is expected to test the $400 level, then move above its peak levels over $629. In an extended bull cycle, AAVE is expected to rival the former valuations of MKR with four-digit prices in the most bullish scenario.

Aave grows stablecoin liquidity

One of the key features of Aave is its partnership with other DeFi protocols. Aave is gradually incorporating other assets, one of which is Ethena’s USDe. 

The synthetic stablecoin is considered riskier but has been released into Aave vaults. In two months, Aave moved up from an experimental 2M USDe to 620M. USDe can be used as collateral, releasing a total of $578M liquidity in other assets, with a margin for over-collateralization.

AAVE diminished the supply of GHO, its native stablecoin, back under the cutoff range of 175M. The current supply of GHO is back at 169M tokens, for now delaying a buyback and burn of AAVE tokens. 

The liquidity profile of Aave is also shifting. The share of Arbitrum lending has increased to 20% of all volumes, with more influence from Avalanche and Optimism. Ethereum and Base remain the biggest platforms for Aave. 

In terms of whale transactions, Aave is also returning to levels not seen since 2022. AAVE saw a total of 587 whale transactions based on Santiment data. Those monthly levels are the highest since March 2022, before Aave cut its liquidity in response to the shrinking crypto market. 

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Coinbase CEO Brian Armstrong announced the exchange would sever ties with law firms that hire former regulatory officials linked to what he describes as “unlawful” actions against the crypto industry.

Armstrong’s comments, made in a social media post on Dec. 3, follow news that former SEC Division of Enforcement Director Gurbir S. Grewal joined Milbank’s Litigation & Arbitration Group — prompting the Coinbase CEO to single out the firm as one the exchange would no longer engage with.

Armstrong stated:

“We’ve let all the law firms we work with know that, if they hire anyone who committed these bad deeds in the (soon to be) prior administration, we will no longer be a client of theirs.”

Armstrong criticized senior partners at law firms for being “unaware of the crypto industry’s position” on the issue. He specifically referenced Grewal, accusing him of contributing to regulatory actions that he called “an ethics violation.”

The Coinbase CEO claimed the prior SEC administration under Gary Gensler had “unlawfully” targeted the crypto industry while refusing to provide clear guidance on compliance.

Armstrong wrote:

“This was not a normal SEC tenure. If you were a senior there, you cannot say you were just following orders. They had the option to leave the SEC, and many good people did.”

Armstrong emphasized that while he does not believe in “permanently canceling people,” the crypto industry should avoid financially supporting individuals he alleges were involved in harming the sector.

He said:

“Let your law firms know that hiring these folks means losing you as a client.”

Milbank did not immediately respond to requests for comment.

The move highlights the deep-rooted tensions between the crypto industry and regulators. Coinbase has been at the forefront of legal and policy battles, with Armstrong often calling for clearer guidelines to foster innovation in digital assets.

Grewal’s tenure at the SEC coincided with increased enforcement actions targeting crypto platforms, including high-profile lawsuits against Coinbase and other firms. His move to private practice reflects a broader trend of regulators transitioning to legal advisory roles in the industries they once oversaw.

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