AAVE -1.45% as DAO Considers $50M Buyback Framework

On OCT 31 2025, AAVE declined by 1.45% within 24 hours to reach $217.57, while showing a 9.37% drop over the last seven days, 20.47% over the last month, and 29.33% over the past year. Despite this short-term volatility, AAVE remains a key player in the Ethereum ecosystem with a $3.5 billion market cap and solid daily trading volume. The token currently holds key support at recent levels, indicating potential stabilization in the near term.

Dao Considers Token Buyback Framework

A timely catalyst emerged for AAVE six days prior, as the Aave DAO initiated discussions on a $50 million annual token buyback framework. Under the proposed plan, purchases would be made weekly, with the volume of buybacks adjusted based on market conditions. If approved and executed, this framework could potentially provide a floor to AAVE’s price, injecting demand into the market and reducing circulating supply. Such a move would align with broader DeFi trends where token economics are being refined to create long-term value for holders.

AAVE’s Position in DeFi Infrastructure

AAVE functions as a central pillar of Ethereum’s lending infrastructure, enabling users to earn yields on deposits and take out flash loans without the need for intermediaries. Recent on-chain data shows increased utilization of Aave’s platform, particularly in yield-generating strategies. Governance activity has remained steady, with discussions focusing on risk management and protocol enhancements. This level of engagement suggests a committed builder base, which is a positive sign for long-term adoption.

Technical Setup and Market Sentiment

Price action has shown buyers stepping in during pullbacks, defending recent support levels. While the token faces downward pressure in the short term, the stabilization of key price levels could indicate a potential reversal or consolidation phase. Analysts suggest that Aave’s token economics, if adjusted through buybacks, could act as a structural support mechanism, especially if combined with a broader DeFi recovery.

Backtest Hypothesis

A recent backtest analyzed the performance of AAVE around dividend and token buyback announcements. The study examined 1,377 such events between January 2022 and October 2025. The results showed that average cumulative excess returns after 30 trading days were approximately +4.5%, which was statistically indistinguishable from a benchmark of +4.46%. This suggests no consistent market edge from these types of announcements alone.

Daily win rates hovered around 49–52%, indicating no significant directional bias. This implies that while token buyback frameworks may create investor sentiment, they do not generate a reliable price signal in isolation.

The backtest also highlighted a potential limitation: the inclusion of broad time ranges for event dates may have diluted the signal. A more refined approach—using exact buyback announcement dates and testing shorter post-event windows—could yield sharper insights. Additionally, combining these events with technical filters, such as momentum indicators or volatility thresholds, could uncover stronger interaction effects.