Aave loses second place to MakerDAO in DeFi TVL race
- Aave’s TVL has slipped by almost 20% in the last seven days.
- Daily transactions involving AAVE have returned more profits than losses.
Following a 15% decline in its total value locked (TVL) in the last week, Aave [AAVE] has been replaced by MakerDAO [MKR] as the decentralized finance (DeFi) protocol with the second largest TVL after Lido Finance [LDO].
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While Aave lost 15% of its already-provided liquidity, Maker’s TVL rallied by almost 2% during the same period. In the aftermath of Curve Finance’s exploit, liquidity providers and borrowers flocked to MakerDAO, causing its wrapped staked Ether tokens deposits (wsETH) to grow significantly in the week that followed 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.
— Maker (@MakerDAO) August 1, 2023
No thanks to Mr. Egorov
The persistent decline in Aave’s TVL was attributed to the protocol’s exposure to the 30 July Curve’s exploit. Prior to the hack, Curve’s founder Michael Egorov had used some of his CRV tokens as collateral to borrow from various lending protocols, with the largest loan taken from Aave (over $100 million).
Mich confirming hacker got the large CRV pool.
That's probably enough CRV to push Mich's $100M+ of CRV into liquidation on Aave, Inverse and Abracadabra if its not absorbed.
This is going to be nasty for those protocols and for Curve.
Can rebuild but possibly brace for impact https://t.co/5LHPE8jXxt
— Adam Cochran (adamscochran.eth) (@adamscochran) July 30, 2023
As the market scrambled to recover the funds that remained following the hack, the negative sentiment put downward pressure on CRV’s value, leading to the fear that Egorov’s collaterals on Aave might be liquidated.
With many liquidity providers fearing a contagion effect on Aave, they removed their funds from the lending protocol.
Aave’s TVL has continued to drop despite Egorov’s attempts to satisfy his debt obligations. Per blockchain sleuth Lookonchain, the DeFi protocol founder has continued to sell some of his CRV holdings in trades completed over the counter (OTC) to raise money to repay his debts.
— Lookonchain (@lookonchain) August 6, 2023
As of 6 August, Egorov’s debt on Aave stood at $29 million, with 189 million CRV tokens held as collateral. Per data from Debank, the health factor of the loan stood at 2.21 at press time.
In case you trade AAVE daily…
Although the alt’s price has declined by 7% in the last week, an on-chain assessment of its ratio of daily on-chain transaction volume in profit to loss revealed that many transactions completed during that period returned profits.
This metric tracks the ratio between transaction volume in profit and transaction volume in loss. A positive ratio above zero suggests market participants make more profits than losses. Conversely, a ratio of less than zero in the negative territory signals that traders are making more losses than profits.
On a 7-day moving average, for every 1 AAVE transaction that resulted in a loss, there were 1.29 AAVE transactions that resulted in a profit.
However, a closer look at the asset’s general profitability revealed that many investors have continued to hold at a loss. A look at AAVE’s Market Value To Realized Value ratio (MVRV) revealed this. At press time, this was -3571.04%.
How much are 1,10,100 AAVEs worth today?
An asset’s MVRV measures the ratio between the current market capitalization of an asset and its realized capitalization. It is used to determine whether an asset is undervalued or overvalued.
Resting under the zero line in the last year, AAVE has since been severely undervalued. This suggested that most traders realized losses on their investments each time they sold their AAVE tokens at the current price.