Aave is currently the largest and most proven lending protocol and is undoubtedly the undisputed leader in on-chain lending. With the rapid development of decentralized finance (DeFi), the importance of Aave has become increasingly prominent. As a leader in one of the most important sectors in the cryptocurrency field, Aave is severely undervalued by the market and has huge future growth potential, which the market has yet to fully realize.
Aave’s History and Achievements
Aave was launched on the Ethereum mainnet in January 2020 and has been operating steadily for five years. During this time, Aave has not only become one of the most proven protocols in the decentralized finance and lending space, it is currently the largest lending protocol, with $7.5 billion in active loans, making it the second largest protocol Five times as much as Spark. This achievement is a prime example of Aave’s strong position in the market.
Aave’s continued growth
As of August 5, 2024, Aave's indicators continued to grow and have surpassed the highs of the previous cycle. Aave is one of the few DeFi protocols to surpass bull indicators for 2021. Aave's quarterly revenue, for example, has surpassed its revenue peak in Q4 2021 at the height of the bull market. What is even more significant is that even if the market enters a consolidation phase from November 2022 to October 2023, Aave's revenue growth momentum continues to increase rather than decrease, and continues to maintain a strong growth acceleration.
Entering the first and second quarters of 2024, as the market gradually picks up, Aave's growth momentum remains strong, with its quarter-on-quarter growth remaining between 50-60%, showing that the market demand for its products remains strong.
Stunning growth in total value locked
Year-to-date, Aave’s total value locked (TVL) has nearly doubled, a growth driven both by an increase in deposits and by increases in the prices of underlying collateral assets such as WBTC and ETH tokens. As a result, Aave’s TVL has recovered to 51% of the 2021 cycle peak level, demonstrating its strong resilience compared to other leading DeFi protocols.
Aave's Profitability: Aave's excellent profitability demonstrates product-market fit. Aave’s revenue peaked during the last cycle when multiple smart contract platforms such as Polygon, Avalanche, and Fantom spent large amounts of token incentives to attract users and liquidity. This caused speculative capital and leverage to surge to unsustainable levels, underpinning the revenue figures of most protocols at the time.
However, today, the token incentives of the main chain have dried up, and the token incentives of Aave itself have also dropped to a negligible amount. This means that Aave’s growth relies primarily on organic and sustainable market demand rather than incentives.
Growth across Aave's metrics over the past few months has been organic and sustainable, driven primarily by a resurgence in market speculation that has in turn driven higher active lending and borrowing rates. Additionally, Aave has demonstrated the ability to strengthen its fundamentals even during periods of subdued speculative activity. Taking the comprehensive collapse of the global risk asset market in early August this year as an example, Aave's income still performed well, thanks to its successful collection of liquidation fees when loan repayments, which fully proved Aave's ability to withstand different underlying collaterals and chains. The impact of market fluctuations.
Market performance challenges
Despite a strong fundamental recovery, Aave's market performance hit its weakest level in three years. Despite a strong recovery across metrics over the past few months, Aave's price-to-sales (P/S) ratio remains low at 17x after falling to its lowest level in three years, well below the three-year median of 62x times.
This phenomenon reflects the market's undervaluation of Aave, despite its continued improvement in fundamentals. As the DeFi ecosystem continues to develop, Aave is expected to regain market recognition in the future.
in conclusion
In summary, Aave, as the core pillar of decentralized finance, has demonstrated strong resilience and sustained growth momentum in terms of lending scale, growth potential, and profitability. Despite challenges with market performance, Aave's fundamentals remain strong and it is poised to re-emerge in the market going forward. For investors, Aave may be an undervalued investment opportunity, and it is worth paying close attention to its future development.