Key takeaways
How is the protocol doing on the profit and revenue front?
Profits have increased recently, reaching their fourth highest level since 2020, with revenue growth also increasing.
But is all this news good?
Total Value Locked (TVL) outflows fell $682 million, even as derivatives traders bet on a rally.
Aave (AAVE) saw decent growth over the past 24 hours, with the crypto gaining 4% on the charts.
However, the positive outlook does not appear to directly correlate with on-chain activity, especially since capital outflows have been dominant of late. Hence the question: what does this decorrelation mean for price developments?
Earnings and revenue performance remains positive
Recent Aave earnings data, which tracks revenue excluding user incentives, highlighted a sharp increase at press time.
In fact, according to DeFiLlama, Aave’s profits soared to $12.686 million, marking the fourth highest quarterly figure since its inception. This increase reflects increased activity and use of the protocol.
Source: DeFiLlama
It’s worth noting that fees generated this quarter also jumped to $124.59 million, just over a month into the quarter.
Such a steady increase in fee generation and earnings portends a strong outlook for investors evaluating Aave’s revenue potential.
However, there is more to this. In fact, holders who collectively earned $27.3 million from their AAVE holdings recently began leaving the network.
Capital flight raises concerns
Capital outflows into the market remained dominant, as shown by Aave’s Total Value Locked (TVL).
In a single day, TVL saw capital outflows of $682 million – a significant sell-off. This brings the total to approximately $32.23 billion.
The scale of these capital outflows, however, represents much more than simple profit-taking. This indicates that investors are withdrawing from potential profits worth $27.3 million this year (a very positive sign), while moving their funds to stablecoins.
Source: DeFiLlama
Trading volume also declined simultaneously, suggesting that users were not actively transacting AAVE and that the momentum behind the recent 2.4% price rise was weak.
This is also the lowest trading volume since November 2. However, unlike this period, the TVL increased slightly, highlighting a hint of bullish sentiment.
Nonetheless, persistent outflows add significant pressure to AAVE. This could push the asset lower in the price charts.
Why do traders remain optimistic?
Perpetual traders continue to bet on an AAVE rally, despite strong outflows from on-chain investors.
At the time of writing, the open interest weighted funding rate was positive at 0.0059% over the last 24 hours. This suggests that most of the $282 million in liquidity in the market comes from long traders.
Source: CoinGlass
Retail cash investors are also joining in on the bullish sentiment, purchasing $1.03 million worth of AAVE in the past 24 hours. This week alone, $8.89 million worth of AAVE was purchased – close to double digits.
However, capital inflows from spot and derivatives traders still lag behind the large-scale sales by on-chain investors who offloaded hundreds of millions of AAVE.
