Grayscale Champion’s Aave Protocol with Positive Long-Term Expectations

Key Insights:

• Grayscale says AAVE protocol could soon become a household name.
• AAVE crypto could be on the verge of a breakout after demonstrating bullish divergence.
• AAVE lending deposits level out at $42 billion while stablecoin total supply pushes to new high.

You were likely familiar with Aave Protocol if you were in crypto since before and during the 2021 bullrun. It was one of the biggest players and pioneers in the DeFi Lending segment.

The Aave Protocol was quite popular back then, but its popularity has somewhat cooled, especially during the ongoing bear market. Moreover, numerous other rivals have popped up since then, somewhat diluting the hype.

Despite this, Aave Protocol remains one of the leading lending and borrowing WEB3 platforms. In fact, Grayscale believes that the protocol’s best days might be ahead.

Zach Pandl, Head of Research at Grayscale described Aave protocol as a bank without bankers in a recently published report. This description might be the reason why Bank of Canada researchers found that it had a much lower net interest margin (NIM) compared to US and Canadian banks.

Unlike the banks, Aave protocol does not require human operators to make loans. Hence, lower operating costs. The Grayscale exec believes that Aave Protocol has long-term growth opportunities and could eventually become a household name.

Why Aave Protocol Native Coin Could Be Heading for a Breakout?

Grayscale’s confident take on Aave Protocol suggests that its native token has long-term potential upside. Aave crypto price exchanged hands at $90 at press time, which means it is currently sitting on a 76% discount from its highest point in 2025.

Aave Crypto Price Chart | Source: TradingView

The discount was even steeper from its 2021 peak by roughly 87%. This means investors may find its current levels to be appealing. Besides the discounted prices, there was one other major reason why AAVE crypto has solid bullish prospects, especially in the short term.

Earlier this week, the AAVE price slid lower than it did in February. Meanwhile, its RSI was higher than its lowest level in February. This underscored a bullish divergence that may pave the way for a bounce from its current level.

The AAVE price so far signals weak demand or a lack of bullish momentum. It has maintained an overall downtrend since August last year. While price action remained subdued, it was also worth noting key performance metrics, which may offer insights into organic activity.

Aave Protocol Lending & Current Market Scenario

DeFi protocols tend to experience liquidity exodus under stressful market conditions. Aave Protocol was not immune to this during the bearish market conditions in the last few months.

Aave lending deposits cooled down substantially, meaning investors cautiously pulled their funds. Lending deposits peaked above $73 billion in October last year but have since dropped to the $40 billion level.

Aave Protocol Lending Deposits | Source: Artemis

While lending deposits cooled by about $30 billion, they have since leveled out, and even improved slightly to the $43 billion level. This meant that there was still a considerable amount of liquidity left.

Speaking of liquidity, Aave protocol’s stablecoin total supply maintained steady growth in the last 6 months. The stablecoin supply recently surged past $585 million, which was a new ATH.

AAVE Stablecoin Total Supply | Source: Artemis

Rising stablecoin supply on the AAVE network suggests readiness for robust demand. Especially now that institutional activity is on the rise and tokenization is rapidly becoming the norm.

Aave protocol usually sees robust uptake during the bullish market phases and lower activity during the bear markets. The same applies to its native coin, AAVE crypto. This suggests that the native token may bounce back once the market flips.

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