Aave deposits top $19.5bn as traders bet on Ethereum

Crypto deposited in Aave, the largest decentralised lending protocol, is approaching a level not seen since the crash of Terra’s UST stablecoin two years ago.

The value of crypto deposited in Aave topped $19.5 billion Wednesday, its highest figure since May 9, 2022, according to DefiLlama data.

It’s the latest sign that DeFi has recovered from the myriad cataclysms of 2022 that wiped two-thirds of the industry’s market capitalization.

It’s also a sign that crypto traders are rushing to double down on Ether after ETF watchers said the Securities and Exchange Commission was likely to approve spot Ether exchange-traded funds in the coming days.

Earlier this year, the launch of spot Bitcoin ETFs sent Bitcoin soaring to new heights. Ether peaked in November 2021 at $4,800. Ether was recently trading at $3,763, down less than 1% in the past 24 hours.

Lending protocols like Aave help traders obtain leverage, a way to supercharge their gains — and their losses. It is built on top of a dozen blockchains, but roughly 90% of the dollar value of deposits are on Ethereum and its layer 2 blockchains, such as Arbitrum.

On Monday, Bloomberg Intelligence analysts James Seyffart and Eric Balchunas amended their odds of the SEC approval of spot Ether ETFs to 75% from 25%, prompting a 20% jump in the cryptocurrency’s value.

Traders have rushed to Aave in the days since.

In the seven days preceding the Bloomberg analysts’ announcement, more than $450 million in crypto flowed into Aave V3, the latest iteration of the protocol. Since Monday, crypto worth more than $517 million has been deposited in V3.

The amount of crypto borrowed on Aave topped $6.7 billion Wednesday, its highest level since May 9, 2022.

Aleks Gilbert is a DeFi correspondent based in New York. Have a tip? You can contact him at aleks@dlnews.com.