- Aave’s TVL is down nearly 20% in the past seven days.
- Daily trades with AAVE have produced more profit than loss.
After a 15% drop in total value locked (TVL) over the past week, Aave [AAVE] has been replaced by MakerDAO [MKR] as the decentralized finance protocol (DeFi) with the second largest TVL after Lido Finance [LDO].
Source: DefiLlama
Is your wallet green? Check out the AAVE Profit Calculator
While Aave lost 15% of its already provided liquidity, Maker’s TVL rose nearly 2% over the same period. In the wake of Curve Finance’s exploit, liquidity providers and borrowers flocked to MakerDAO, significantly increasing the packaged stake of Ether tokens (wsETH) in the week following the hack.
WSTETH has surpassed WETH as the leading crypto collateral in terms of USD value locked within the Maker Protocol.
WSTETH – $2 billion deposited.
WETH – $1.98 billion deposited.
→ https://t.co/Y96Cgy7RIg pic.twitter.com/Ad3v3eUHUj
— Maker (@MakerDAO) August 1, 2023
No, thanks to Mr. Egorov
The continued decline in Aave’s TVL was attributed to the protocol’s exposure to the July 30 curve exploit. Prior to the hack, Curve founder Michael Egorov had used some of his CRV tokens as collateral to borrow on various lending protocols, taking the largest loan from Aave (more than $100 million).
Mich confirming hacker got the big CRV pool.
That’s probably enough CRV to push Mich’s $100M+ worth of CRV into liquidation on Aave, Inverse and Abracadabra if not absorbed.
This is getting nasty for those protocols and for Curve.
Can be rebuilt, but may need to brace for impact https://t.co/5LHPE8jXxt
— Adam Cochran (adamscochran.eth) (@adamscochran) July 30, 2023
As the market raced to recover the money left over from the hack, the negative sentiment put downward pressure on CRV’s value, leading to fears that Egorov’s collateral on Aave could be liquidated.
Because many liquidity providers feared a contagion effect on Aave, they removed their money from the lending protocol.
Aave’s TVL has continued to fall despite Egorov’s efforts to meet his debt obligations. According to blockchain sleuth Lookonchain, the founder of the DeFi protocol has continued to sell some of his CRV holdings in transactions completed over the counter (OTC) to raise funds to pay back his debts.
Update:
The #Curvefi founder (Michale Egorov) sold a total of 142.6 million $CRV to 30 institutions/investors over the counter at a price of $0.4 and received $57 million to repay debt.
He currently has 269.8 million $CRV($166 million) in collateral and $48.7 million in debt across 4 platforms.https://t.co/8ozY1y5KrO pic.twitter.com/ITA08Fuf4f
— Lookonchain (@lookonchain) August 6, 2023
As of August 6, Egorov’s debt to Aave was $29 million, with 189 million CRV tokens as collateral. Per data from the couchthe loan’s health factor stood at 2.21 at the time of writing.
If you trade AAVE on a daily basis…
While the price of the alt is down 7% over the past week, an on-chain assessment of the ratio of daily on-chain trade volume to profit and loss showed that many trades completed during that period turned in profit.
Source: Sentiment
This metric tracks the ratio between trade volume in profit and trade volume in loss. A positive ratio above zero suggests that market participants are making more profits than losses. Conversely, a ratio of less than zero in the negative area indicates that traders are making more losses than gains.
On a 7-day moving average, for every 1 AAVE trade that resulted in a loss, there were 1.29 AAVE trades that resulted in a profit.
However, a closer look at the overall profitability of the asset revealed that many investors continued to lose money. A look at AAVE’s Market Value To Realized Value ratio (MVRV) revealed this. At the time of going to press this was -3571.04%.
How much are 1,10,100 AAVEs worth today?
Source: Sentiment
An asset’s MVRV measures the ratio of an asset’s current market capitalization to its realized capitalization. It is used to determine whether an asset is undervalued or overvalued.
Resting below the zero line for the past year, AAVE has been severely undervalued ever since. This suggested that most traders realized losses on their investments every time they sold their AAVE tokens at the current price.