The Aave (AAVE) market has been on an absolute run for weeks, and today the DeFi token has hit a new all-time high of $288.90.
The decentralized finance protocol is one of the most common on the market and the recent surge in the DeFi sector is one of the driving forces behind the AAVE rally.
At the beginning of 2021, the AAVE price traded at $83 and the latest rebound seems to have improved the protocol’s rising overall value locked, expanded on-site purchasing volume and derivative exchanges, and ongoing growth of Aave’s lending platform and flash loan issuance.
TVL soars to a new high
Data from DeFi Pulse reveals that Aave’s TVL rose from $2.03 billion on Jan. 1 and that the price of Aave’s TVL (BTC) and Ether (ETH) also rose.
Currently, Aave’s TVL is sitting at a fresh all-time high of $3.75 billion, rendering TVL’s second-largest DeFi network after Creator (MKR).
The steady addition of new tokens to the loan and borrowing protocol raises the probability that its TVL will continue to grow and help AAVE maintain its position as one of the top DeFi projects in the cryptocurrency room.
Staking drives demand for AAVE token
AAVE’s trade value also grew in early 2021, rising from $200 million on Jan. 3 to $928 million on Jan. 16.
As AAVE’s price hit a new peak, its 24-hour trading volume reported a record $1.06 billion. This volume spike is partly motivated by buyers purchasing more tokens for the stakes, with 26.8 percent of the overall supply of AAVE already on the exchange receiving an APY of 6.1 percent.
Flash loans attract investors
Another reason for AAVE’s recent upsurge is the rise of its flash loans.
Flash loans allow cryptocurrency investors to collate their portfolios to finance other investments or new purchases of cryptocurrency. The loans also allow borrowers to use the value of their tokens without the need to sell them and to establish a taxable case.
Since the introduction of flash loans less than 12 months ago, more than $1.7 billion has been released and this amount is projected to rise as the crypto bull market continues.
As can be seen in the map above, the dominant token demanded for flash loans is the DAI stablecoin, followed by the USDC and the ETH. Messari data reveals that Aave provided $25 million in loans in the first half of 2020, $500 million in Q3, and almost $1 billion in Q4, including $450 million in December.
The extension of the Flash Loan concept is likely to draw more users to Aave, particularly when it can be used for arbitration between DEXs, collateral exchanges, self-liquidation and a number of other applications in the DeFi market.
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