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AAVE, the native token of decentralized crypto lending platform Aave, has surged by over 45% in just four weeks to $135.
While this rise of AAVE is notable, AAVE has surpassed all of the top 100 cryptocurrencies by market value, including market leaders Bitcoin (BTC) and Ethereum (ETH).
While the reasons behind this rise were wondered, experts guessed that recent innovations in AAVE triggered this rise.
Proposed Changes Support Price Increase!
According to experts, the reason behind AAVE’s rise was Aave-Chan Initiative founder Marc Zeller’s proposals to distribute a portion of the platform’s net income to critical actors in the ecosystem and a fee change for buying back AAVE tokens from the secondary market.
Speaking to Coindesk, CCData research leader Joshua de Vos emphasized that the distribution of excess income in AAVE significantly increased market sentiment.
“Proposals for the AAVE economy, along with the possibility of new incentives to hold and stake AVE, have increased market and investor sentiment around the project.
These ultimately had a positive impact on the price.”
Another important reason for AAVE's price increase was innovation, which reduced the selling pressure on AAVE.
Arca Head of Research Katie Talati noted that this innovation is the platform’s “Umbrella” offering, which aims to improve how it handles risky loans.
According to this proposal, instead of selling AAVE tokens when loans go bad, the plan is to reduce the supply by burning them.
“The goal of the proposal is to create a new system called Umbrella that will use a variety of assets to cover bad debts in the protocol (when a position is liquidated and the collateral does not cover the liquidation cost) instead of just using the AAVE token.
So the new system will relieve some of the pressure on selling AAVE.”
Finally, Wintermute also noted that AAVE’s token economy and risk management innovations have increased institutional interest. According to Wintermute, this indicates that the AAVE price will remain strong in the future.
AAVE continues to trade at $133 at the time of writing.
*This is not investment advice.