Aave is a protocol in the decentralized finance (DeFi) sector that enables users to borrow and lend cryptocurrencies. Originally called ETHLend, Aave was launched in November 2017 by entrepreneur Stani Kulechov. Borrowers can take out flash loans using their crypto as collateral, while lenders can deposit their crypto into liquidity pools to earn interest.

AAVE is the native governance token of the protocol and allows token holders to vote on future protocol upgrades. The token can also be staked to earn more AAVE and a share of protocol fees. The price of AAVE has seen significant change during its relatively short history and if you want to know why then you’re in the right place. We’ve compiled everything you need to understand AAVE price – as well as the factors which influence it.

Aave Price History

Before AAVE was launched, the protocol’s native token was called LEND. LEND was worth a few cents or less throughout most of its history and never got close to breaking the $1 level. In October 2020, Aave users voted in favour of a token migration and LEND migrated to AAVE at a rate of 100 LEND per 1 AAVE.

Aave began trading in the first week of October 2020 at around $50. Prices gradually declined over the next month until they reached a low of $25.94 in the first week of November. The trend reversed at that point and AAVE managed to set a series of higher highs and higher lows for the rest of the year, with its market cap surpassing $1 billion for the first time at the start of December. By the end of 2020, AAVE was worth $88.48, representing gains of about 77% since the migration.

The rally became steeper in the new year, with the price of AAVE more than tripling in January 2021. Price growth became sharper still in February, with prices almost doubling in the first week alone. The surge culminated in a peak on 10 February 2021 at AAVE’s all-time high of $581.67. At that point, Aave had a market cap of over $6.7 billion.

Prices then retraced by half to a low of $284.63 a fortnight later. There were a few more unsuccessful attempts to resume the rally over the next couple of months, with a 40% pullback in the second half of April. By the end of April, AAVE had reclaimed $430, providing year-to-date gains of 387%

Analyzing Aave Price History

AAVE’s price history can be analyzed with many of the same techniques as stock market analysis. Technical analysis (TA) involves using various indicators while studying price charts in order to make sense of previous price movements. With AAVE, as with many other tradable assets, large price swings are often accompanied by spikes in trading volume, as a large number of users buy or sell their coins on exchanges. On-chain data also shows that the number of AAVE transactions peaked during the steep rally in February.

Fundamental analysis (FA), on the other hand, looks at the finances and activities of a company, as well as the state of the wider market and economy. The Aave protocol has contributions from some big-name stakeholders including ParaFi Capital, Winklevoss Capital and Blockchain.com, and the project’s Github page shows regular activity, which could be good signs for Aave’s fundamentals.

Broader market trends have also played a role in AAVE’s price history. Its surge in the first quarter of 2021 wasn’t unique – the entire crypto market pumped around this time. Bitcoin was in the midst of a major bull run then, and with such strong market dominance, any significant price movement for Bitcoin often impacts other cryptocurrencies.

The pullback in April 2021 was also common across other cryptocurrencies and markets and was believed to be influenced by the US government’s proposal at that time to significantly increase long-term capital gains taxes.

The overall price trend of AAVE tends to follow what’s known as a boom-and-bust cycle. This is a pattern in which a period of growing excitement leads to a surge in price before doubt and disillusionment set in and result in a crash.

Factors Influencing The Price of Aave (AAVE)

A variety of different things can affect the price of AAVE, including project news and developments, the flow of assets on exchanges, public sentiment, and emerging trends in the wider cryptocurrency and global economies.

AAVE has a capped max supply of 16 million, 13 million of which were redeemed by LEND holders. The remaining 3 million were allocated to the Aave ecosystem reserve. Some of the protocol fees are used to burn AAVE, making it a deflationary asset. This gradually reducing supply will cause the price of AAVE to rise if demand for the token can be sustained.

One reason for AAVE demand is the governance rights it provides. Aave is one of the most popular DeFi protocols and AAVE holders can vote on risks, incentives, and improvements to the protocol. This could encourage more DeFi users to buy AAVE to participate in protocol governance.

In order to insure against a liquidity deficit, the protocol is secured by a Safety Module which contains locked up AAVE that can be auctioned on the market to cover a deficit. This means that if a deficit were to occur, the new AAVE hitting the market could devalue the token. However, users who stake their AAVE in the Safety Module earn more AAVE as well as a share of protocol fees, which could lead to more demand for AAVE to stake and drive up its price.

A rise in protocol fees would simultaneously reduce the AAVE supply through burning and drive up token demand by providing better staking incentives. It is therefore likely that the price of AAVE would increase with the protocol’s adoption and total value locked.

Live Aave Value and Market Cap

The live price of AAVE varies from moment to moment as it’s dictated by the balance of buyers and sellers on exchanges, which is in constant flux. 

Given AAVE’s volatility, its live price can change by a large amount in a very short space of time. The market cap of Aave is equal to the price of AAVE multiplied by the number of AAVE in circulation.

Aave Price FAQ

How is the price of AAVE calculated?

AAVE’s price at any given time is decided by the balance of supply and demand on exchanges. When more people are buying AAVE than selling it, the price goes up, and when more are selling than buying, the price goes down.

Why is the price of AAVE different on different cryptocurrency exchanges?

AAVE’s price is based purely on trading as there is no standard global AAVE price, so no one knows what it is “supposed” to cost. The trading volume and liquidity are different for each exchange and those differences are what affects the price.

What will AAVE be worth in the future?

It’s impossible to make price predictions with any kind of absolute certainty, as a whole host of different factors could play a role in determining the future value of Aave. However, as rising protocol fees both reduce the supply through burning and provide greater incentive to stake AAVE, it seems likely that the price of AAVE will rise in line with the level of adoption of the protocol.

Conclusion

Since the token migration in October 2020, the price of AAVE has already seen significant changes, going from lows of under $26 to highs of over $580. The price movements haven’t been smooth, however, as AAVE’s volatility can lead to surges and crashes.

Many different factors have played a role in determining the price of AAVE, including the use of protocol fees to burn AAVE, token demand for staking in the Safety Module, and trends in the rest of the crypto market and wider economy. Its current valuation is derived from the balance of supply and demand in the markets and constantly changes.

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