On the Avalanche, Polygon, and Ethereum networks, you can use a platform called Aave to borrow and lend money. The most recent data from Messari demonstrates that both the general decline in market value and the scandal surrounding Terra had a significant impact on the amount of money that was borrowed and lent within the cryptocurrency market during the preceding three months. In Q2 as a result, Aave’s revenue decreased.
Q2 Revenues Decline
Messari found out that Aave’s revenue dropped by 18% as a result of a decrease in borrower demand in the midst of falling cryptocurrency prices. The project’s first-quarter revenue was $63.5 million. During this same time period, Aave closed the previous quarter with revenue of $51.8 million.
While the revenue generated by the protocol went down, the decline phase took different forms across the various chains that make up the platform that hosts the protocol (Messari data). Since Celsius was one of Aave’s most prominent customers, the percentage of users who were on ETH V2 during the second quarter fell significantly.
According to the report, Celsius’ primary wallet was able to repay approximately twenty percent of the total debt owed on Aave ETH between June 9 and June 13. Aave’s ETH posted a nearly 36% revenue drop within three months as a result of massive repayments in addition to overall falls in crypto assets that totaled over 50%. Aave Ethereum’s revenue for the quarter was $30 million.
The Avalanche that was deployed by Aave, on the other hand, revealed a completely different story. Avalanche’s total revenue increased by 20% during the previous quarter. In addition, Messari found that Aave’s revenue from Avalanche exceeded its revenue from ETH-based transactions during the months of May and June.
What was the primary factor in the sharp increase in revenue generated by Avalanche? According to Messari, the majority of the action in Aave’s revenue was triggered by the Avalanche’s Rush incentives, which were paid out in AVAX tokens. As a result of the incentives, the cost of borrowing money is reduced to a level that is lower than the rate that must be paid to depositors. This makes it possible for borrowers to earn an almost risk-free yield by repeatedly depositing funds that they have borrowed.
In addition, Aave’s deployments on Arbitrum, Polygon, Optimism, Fantom, and Harmony did not show signs of losses or gains during the preceding quarter (Messari data). Aave loans are backed by a variety of cryptocurrencies, from unbacked cryptos to stablecoins.
Since the beginning of the year 2021, approximately 98% of Aave’s quarterly revenue has come from stablecoin loans. During the preceding quarter, Messari found that stablecoin loans accounted for only 82% of the protocol’s revenue, despite the fact that this number is still quite high.
Is There Development?
Token Terminal data reveals that the number of Aave holders increased by 6% during the second quarter. By June 30th, this metric hovered at 114,572. In the last 90 days, the network has seen a 32% increase in its active user base.
Editorial credit: photo gonzo / shutterstock.com
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