AAVE Utilization Drops To Record Lows; Will It

Crypto intelligence platform Messari in a new report about decentralized finance (DeFi) protocol Aave, delves into details about the firm’s revenue and utilization in Q1 and Q2 of this year. Stablecoin utilization hit a new six months record low.

ETH borrows fill up gap left by less stable coin utilization

DeFi protocol Aave is not left out of the 2022 crypto contagion as the new report and analysis from Messari shows. The protocol’s quarterly revenue declined by 18% as major market plagues like the UST Implosion caused a reduction of demand in Aave loans.

Stablecoin utilization on the platform dropped to 60% but per the research, overall utilization rate was unaffected and actually spiked in the last quarter.

This is interesting because in the past stable coins made up 98% of Aave’s revenue but other markets have since filled up the decline in utilization of stables.

The main market responsible for this is ETH which now pays even more yield on deposits than stable coins in Aave Ethereum. Per Messari, the increase in demand for ETH loans is due to short-exposure and ETH’s proof-of-stake mechanism which requires 32 ETH.

Beleaguered crypto lender Celsius also accounts for some of the loss of revenue in Aave. In a single day in July, Celsius reportedly withdrew “a third of all of Aave’s stETH deposits”. Generally, the reduction of stable coin borrows resulted in less stable coin utilization in Aave.

Aave’s latest products might increase revenue

The research also captures three new products by Aave that are likely to help rid of the issues contracted by low stable coin utilization. Some months back, fhe DeFi protocol enhanced its Aave V3, more recently, it announced the launch of stablecoin GHO and lens protocol.

The launch of the over collateralized Stablecoin GHO is strategic because the majority of Aave’s revenue over the last six months flow in from the stables.