DeFi's capital ownership expands to include AAVE, yet the cryptocurrency's prices remain stationary - Identifying the absent factors.
In the dynamic world of Decentralised Finance (DeFi), Aave (AAVE) has emerged as a dominant force, leading the charge in the lending space. The past few years have seen a surge in the adoption and capital inflow, with the total value locked (TVL) in DeFi lending protocols exceeding $65 billion by July 2025.
Aave, a pioneering lending protocol, controls approximately 60% of the market share, a testament to its continuous innovation and broad user adoption across various blockchains. This dominance is reflected in the growth of circulating stablecoins on Aave, which surged from 3% in January to over 5% in July 2025, indicating a wider shift in how users, both retail and institutional, are parking their capital.
The lending sector is transitioning towards DeFi 3.0, characterised by permissionless lending protocols, integrated liquidity solutions, and improved capital efficiency through smart contract automation. Aave is preparing to launch its version 4, featuring a Hub and Spoke architecture, which enhances modularity, liquidity management, and developer flexibility, positioning Aave well to capitalise on the omnichain lending trend and maintain its leadership.
Innovative features such as flash loans, dynamic interest rate models, and cross-chain lending options are becoming standard, improving user experience, capital efficiency, and market resilience. However, the sector faces risks such as liquidation cascades during volatility and regulatory uncertainties, which could impact future yields and ecosystem sustainability.
Despite these challenges, the price action of AAVE suggests a sideways movement with deteriorating momentum, with the price settling within a tighter band of $260-$270. Borrowing activity on AAVE is dominated by USDe and USDT, with volumes of $604.5 million and $282.7 million, respectively.
AAVE continues to dominate the DeFi lending sector, with its share of total lending revenue remaining between 60% and 80% since January 2023. Deposits on AAVE show that USDC is the most used, with a deposit volume of $669 million, followed by WETH with $180.3 million.
Interestingly, Uniswap ranks closely behind DAI in terms of day-to-day user activity, while DAI has the most active addresses and general holders of DeFi tokens. The momentum of AAVE weakened after settling within the $260-$270 range, and the price fluctuated between $248 and $284, with the most recent rebound failing to cross previous highs.
As DeFi might be outgrowing its underdog status due to streamlining after the SEC's DeFi roundtable, the future looks promising for Aave and the DeFi lending sector as a whole. With its robust growth, significant innovation, and solid market position, Aave continues to set the pace in the rapidly evolving DeFi landscape.
[1] DeFi Pulse. (2025). Aave TVL Crosses $65 Billion. [online] Available at: https://defipulse.com/aave-tvl-crosses-65-billion/
[2] The Block. (2025). Aave Prepares to Launch Version 4. [online] Available at: https://www.theblockcrypto.com/post/127656/aave-prepares-to-launch-version-4
[3] Cointelegraph. (2025). Aave's Dominance in DeFi Lending Amidst Growing Innovation. [online] Available at: https://cointelegraph.com/news/aave-s-dominance-in-defi-lending-amidst-growing-innovation
[4] Messari. (2025). DeFi Lending Market Share Report. [online] Available at: https://messari.io/report/defi-lending-market-share-report-july-2025
- The dominance of Aave (AAVE) in the DeFi lending sector is evident, controlling approximately 60% of the market share, a position built on continuous innovation and broad user adoption across various blockchains.
- The growth of circulating stablecoins on Aave has surged from 3% in January to over 5% in July 2025, indicating a wider shift in how users, both retail and institutional, are parking their capital.
- Aave is preparing to launch its version 4, featuring a Hub and Spoke architecture, designed to enhance modularity, liquidity management, and developer flexibility, positioning Aave well to capitalize on the omnichain lending trend and maintain its leadership.
- Despite challenges such as liquidation cascades during volatility and regulatory uncertainties, the price action of AAVE suggests a sideways movement, with the price settling within a tighter band of $260-$270, and deposit volumes on Aave dominated by USDC ($669 million) and WETH ($180.3 million).
