A new proposal seeks to reform the existing “seize and sell” loan liquidation process which hasn’t been good for the AAVE price action and replace it with a “seize and burn” strategy.
AAVE whales have turned active recently leading to a strong rally in AAVE price with 45% gains on the monthly chart. As of press time, AAVE is trading at $134.24 with a market cap of just over $2 billion.
As per the recent data from LookonChain, a significant buying spree has been reported with a whale spending 4,000 $stETH worth a staggering $10.4 million in order to purchase 77,270 $AAVE tokens at $135 each within a single day. This shows that the whale interest has continued despite a strong rally over the last month.
Crazy buying of $AAVE!
This whale spent 4,000 $stETH($10.4M) to buy 77,270 $AAVE at $135 in just 1 day!
Address:
0xa923b13270f8622b5d5960634200dc4302b7611e pic.twitter.com/jSMKOiTT0Z— Lookonchain (@lookonchain) August 22, 2024
With its current performance over the last month, AAVE has outperformed all of the top 100 cryptocurrencies by market cap including giants like Bitcoin and Ether. The investor interest in AAVE is so strong that Helium’s HNT, even with 26% gains last month, is still far.
Last month in July, Marc Zeller, founder of the Aave-Chan Initiative, proposed a fee switch for distributing a portion of the platform’s net excess revenue to key ecosystem participants and buying back tokens from the secondary market. This proved to be the major catalyst behind the AAVE price rally. Speaking to CoinDesk, Joshua de Vos, research lead at London-based digital assets data and index provider CCData said:
“There has been speculation that AAVE could activate their ‘fee switch’ to redistribute excess revenue generated by the platform to stakers. This follows a proposal aimed at seeking governance feedback on the protocol’s potential to buy back tokens using surplus revenue and redistribute them to AAVE stakers and the minters of their stablecoin, GHO. This has boosted market sentiment around the project, with the possibility of new incentives for holding and staking AAVE”.
Reforming AAVE Liquidation Process
Furthermore, a new proposal seeks to reform the existing “seize and sell” loan liquidation process which hasn’t been good for the AAVE price action. The proposed reform suggests replacing this mechanism with a “seize and burn” strategy, having the aim to use AAVE’s GHO stablecoin and aTokens that represent assets deposited in the protocol.
Katie Talati, head of research at Arca, indicated that this proposal, known as the Umbrella proposal, could alleviate sell-side pressures on the AAVE market. She said:
“The proposal aims to create a new system, called Umbrella, which would use a variety of assets to cover “bad debt” in the protocol (when a position is liquidated and the collateral does not cover the cost of liquidation) versus only using the AAVE token to cover bad debt. The new system, therefore, would relieve some of the sell pressure on AAVE”.
Web3 agency Deelabs stated that implementing buyback can lead to substantial bullish pressure on AAVE and the Umbrella proposal can mitigate the negative effects on AAVE price due to loan liquidations. These initiatives that seek to revamp AAVE’s tokenomics and boost the protocol’s risk management have led to significant institutional interest in the token.
In addition, Aave has led the industry in revenue and fees earned over the past four weeks. Data from TokenTerminal shows that Aave has generated over $27 million in fees, surpassing other lending and borrowing protocols.
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