Can the growth of AAVE V3 deployment on Ethereum catalyze recovery in the DeFi token?

AAVE V3 was first deployed on Ethereum on January 27. Since then the DeFi protocol witnessed massive growth, adding nearly 11 new assets within a month of its deployment. The Total Value Locked (TVL) in AAVE V3 hit a five-month peak at $831.82 million with the rise in borrowing of Ethereum supplied by liquidity providers. 

It remains to be seen whether the protocol’s popularity and rising TVL can catalyze a recovery in AAVE price. 

Also read: Stablecoin inflows hit record highs for 2023, is this a buy signal?

AAVE V3 deployment on Ethereum witnesses massive growth

Based on data from DeFi intelligence provider, AAVE V3 witnessed a spike in its TVL over the past five months. TVL hit a peak of $831.82 million signaling its popularity among DeFi market participants, as seen in the chart below:

AAVE V3 TVL 

Ethereum has emerged as one of the most popular assets in terms of both liquidity supply and borrowing. At press time, upwards of 94,000 ETH tokens worth $147 million were supplied to the protocol and 51,250 ETH, nearly 55% have already been borrowed. 

Alongside Ethereum, the other popular assets in V3 deployment on the ETH mainnet are:

Popular assets in AAVE V3 deployment on Ethereum

Does higher revenue of a DeFi protocol translate into price gains?

AAVE V3’s daily revenue witnessed a few spikes post its deployment on the Ethereum mainnet.

AAVE V3 daily revenue

AAVE V3’s daily revenue stayed largely above $7,000 since January 27 and the asset’s price has failed to catch up with the growth in the protocol’s revenue.

AAVE price chart

The value accrual from the revenue spike has failed to drive the DeFi token’s value. While this is the case for AAVE in the period between January and March, it remains to be seen whether the asset’s price catches up with its revenue growth in Q2 of 2023.