Aave (AAVE) dropped more than 10% despite the on-chain cash flow still increasing significantly, indicating that the short-term price is under pressure while the fundamental basis of the protocol has not weakened.
The price drop occurred simultaneously with a surge in trading volume and long positions being liquidated, in the context of information that a whale sold off on a large scale. Nevertheless, TVL and protocol fees are still increasing, reflecting the demand for use and the capital locked into Aave.
MAIN CONTENT
AAVE dropped more than 10% despite trading volume increasing by 226% to 577 million USD, under pressure from selling and liquidation of long positions.
Aave's TVL increased by an additional 1.42 billion USD according to DeFiLlama, indicating that capital continues to flow in despite fear sentiment.
Quarterly profits and high protocol fees reinforce the long-term thesis, even though on-chain activity shows signs of slowing.
AAVE is under price pressure as volume surges and longs are liquidated.
AAVE price dropped more than 10% while trading volume surged 226% to 577 million USD, accompanied by liquidations of long positions amounting to 1.59 million USD after news of a whale selling 17 million USD.
This development reflects the familiar disconnect between the derivatives market and fundamental data: when prices drop rapidly, long perpetual positions are easily margin called, creating a forced selling effect and increasing volatility.
In this context, whale selling activity can act as a 'spark' triggering a chain reaction: price slippage, funding, and weakened sentiment, leading to liquidations. However, liquidations due to leverage are often short-term if on-chain capital flow and protocol revenue remain stable.
Capital inflow to Aave increases significantly despite the market being in a state of fear.
Aave's TVL increased by an additional 1.42 billion USD from December 18 to the reporting time according to DeFiLlama data on Aave, indicating that capital continues to be locked into the protocol.
Increased capital flow during declining prices is often understood as a signal of 'holding on faith': investors accept locking assets to seek yield (APY) or expect prices to recover later. If participants choose to put assets into the protocol instead of holding stablecoins or selling, it implies confidence in the utility value of Aave.
The expansion of TVL often improves liquidity depth and scalability for lending, which lays the foundation for sustainable revenue. Although TVL is not a perfect indicator, significant increases during a 'fear' sentiment period are often closely monitored by the market as they reflect longer-term capital behavior compared to short-term spot trading.
Record fees and profits reinforce the long-term growth thesis.
Aave recorded 1.88 million USD in fees over 24 hours and 11.58 million USD over 7 days, while achieving 22.56 million USD in quarterly profit (Q4 2025) calculated as gross profit minus incentives, the highest in the protocol's history.
High fees indicate that actual usage demand remains good, as fees are tied to borrowing/lending activities and liquidity usage levels. When fees remain high, the market often views this as evidence of the 'health' of the product, unlike price fluctuations which may be influenced by leverage.
Record quarterly profits can also impact circulating supply in a 'tightening' direction: investors tend to hold or accumulate AAVE when they believe the business fundamentals are improving, rather than selling due to short-term sentiment. Although the effect on price still depends on many variables, record profits are often important foundational data in valuation.
Moreover, net income of token holders remains positive at 7.11 million USD in the current quarter (as of the reporting time). Although lower than the previous two quarters, this figure still indicates that the value creation mechanism for holders has not reversed.
On-chain activity is slowing down but may reflect a 'cleansing' of users.
Artemis data shows that the number of daily transactions and active users has decreased, but this is not necessarily a bad signal when TVL is still increasing, as it may indicate that the group of short-term traders has left.
When the market is highly volatile, the 'less committed' users often reduce interaction, causing activity metrics to cool off. If capital remains locked in the protocol, the picture may lean towards a scenario of restructuring participants: fewer transactions but more capital remaining.
In a recovery sentiment scenario, sidelined users may return, contributing to increased trading, heightened demand for borrowing/lending, and pushing revenues upwards. Therefore, monitoring TVL, fees, and user activity simultaneously will provide a more comprehensive signal compared to just observing price movements.
Conclusion: AAVE's short-term price is weak, but the fundamentals still show strength.
Aave is a prime example of short-term prices going against fundamentals: technical pressure from whale selling and derivative liquidations, while TVL increased by 1.42 billion USD and quarterly profits reached a peak.
For investors, the main risk still lies in volatility due to leverage and overall market sentiment. However, data on capital inflows, fees, and profits indicate that the protocol is still operating effectively and has usage demand, factors often seen as foundational for AAVE's long-term prospects.
Frequently Asked Questions
Why did AAVE drop sharply even though Aave's TVL is still increasing?
Prices may drop due to short-term selling pressure (e.g., a whale selling 17 million USD) and cascading effects from derivatives when long positions are liquidated for 1.59 million USD, while TVL increasing reflects that long-term capital remains locked into the protocol.
What does the increase of 1.42 billion USD in TVL indicate for Aave?
An increase in TVL indicates that more assets are being put into Aave for lending, borrowing, or seeking yield, implying a certain level of confidence in the product even when the market is in a state of fear.
Is the 1.88 million USD fee in 24 hours significant?
Yes. High fees are often associated with good protocol usage levels, reinforcing the assessment that Aave's business activity remains strong despite token price volatility.
How does the quarterly profit of 22.56 million USD (Q4 2025) affect the long-term thesis?
Record quarterly profits reinforce the narrative of foundational growth and may encourage investors to hold/accumulate AAVE, as they see operational effectiveness and the potential for creating sustainable value.
Source: https://tintucbitcoin.com/aave-giam-10-nen-tang-van-vung-vang/
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