AAVE V3 Launch Triggers 40% Rally In Token But Will It Hold

Last week, one of the leading decentralized finance (DeFi) protocols on the planet AAVE broadened its horizon by introducing AAVE V3 to the world. The reaction to this launch was exceptional as the Dapp brought back lost investors and pushed the altcoin beyond expectations.

AAVE reaches Stage 3

AAVE V3 was launched on March 16 and since then the DeFi token has grown by over 40.41%. The latest version of the protocol has brought a myriad of changes from cross-chain transactions to gas optimization, reducing costs by 20-25%.

Along with this, the third version of the lending protocol will allow for higher borrowing power and allow new assets to be listed while protecting the protocol.

V3 has already been deployed on Polygon, Fantom, Avalanche, Arbitrum, Optimism and Harmony, while the deployment on Ethereum is not yet finalized.

Either way, since then, on-chain metrics have seen a dramatic change in behavior as investors have returned to the network after being inactive for almost 4 months.

Although around 1,000 investors left the market just before the rally began, they have since returned.

AAVE investors leave the market | Source: In the block – AMBCrypto

This is visible by the rise in addresses with balance as well as the spike seen in daily active users. The last time this figure crossed 1.3k was in November 2021.

AAVE Daily Active Addresses | Source: In the block – AMBCrypto

Likewise, transactions are at a 3-month high and the total volume moved across the chain has also increased significantly over the week.

The launch actually came at a necessary time, as investors were beginning to lose faith in the asset, with sentiment consistently negative since mid-February. After the launch of V3, however, investor sentiment saw a major spike, which is a good signal.

AAVE Investor Sentiment | Source: Santiment – ​​AMBCrypto

Indeed, since May, AAVE investors have been waiting for a rally that never came and its ATH has not been breached. As a result, investors suffered losses and as of last week over 88% of investors faced losses, which have since improved slightly. Currently, about 20,000 addresses are in profit.

AAVE investors in loss | Source: In the block – AMBCrypto

Usually, these developments don’t really mean much if they were born out of a simple rally, but since it was triggered by a major development in the ecosystem, the uptrend should hold.

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