AAVE -2.77% Amid $1 Trillion Loan Target and Founder Risk Warnings

On NOV 6 2025, AAVE dropped by 0.44% within 24 hours to reach $200.39, AAVE dropped by 9.79% within 7 days, dropped by 11.95% within 1 month, and dropped by 34.87% within 1 year.

Aave (AAVE) is nearing a landmark in its history, with total all-time loans on the decentralized finance (DeFi) lending protocol approaching the $1 trillion threshold. Despite recent price volatility, this milestone underscores sustained demand and robust network activity. The Aave community announced on its official X channel that the protocol is close to achieving this figure, signaling resilience amid broader market corrections. The Horizon Real World Asset (RWA) market has also seen strong growth, with over $520 million in deposits, reflecting rising institutional interest and real-world adoption of DeFi-based lending.

Aave’s on-chain and derivatives data suggest a bullish outlook. Whale activity has increased, buy dominance is improving, and positive funding rates indicate a potential recovery in the near term. According to Coinglass, the OI-Weighted Funding Rate for AAVE has turned positive, standing at 0.0089% as of Wednesday. This shift implies that long traders are paying short traders, a pattern historically associated with sharp price recoveries. The improvement in derivatives metrics aligns with a broader market sentiment of cautious optimism.

The protocol’s technical profile is also drawing attention. After a sharp decline in late October, the price of Aave retested a key support zone around $179.27. This level is significant as it corresponds with the 50% Fibonacci retracement level and the lower trendline of a falling wedge pattern. Analysts project that a successful defense of this zone could trigger a retest of the $250 level in the coming weeks. The next critical juncture will be whether the price can close above the 78.6% retracement level, currently at $254.35.

Aave founder Stani Kulechov has voiced concerns over systemic risks in DeFi, particularly regarding immutable oracle price feeds and interest rate curve mechanisms. He attributes recent losses from the Stream platform to high-leverage trading and opaque fund utilization. Kulechov emphasizes the need for standardized practices, enhanced transparency, and robust risk management in treasury operations. He argues that the current governance frameworks in DeFi lack the sophistication required to manage volatile liquidity and adverse market conditions. According to Kulechov, these issues pose a material threat to lending protocols and require urgent attention from developers and institutional stakeholders.

Justin Sun, founder of TRON, has made a significant move into Ethereum staking. He recently withdrew 45,000 ETH (approximately $154.5 million) from Aave and deposited it into Lido, a popular Ethereum staking platform. This action has pushed his Ethereum holdings above those in TRX for the first time, indicating a strategic shift toward Ethereum's proof-of-stake model. By staking through Lido, Sun is positioned to earn regular staking rewards while contributing to the security of the Ethereum network. The move has been interpreted as a strong endorsement of Ethereum’s long-term viability and its growing appeal to institutional investors.

MetaAlpha, a major crypto fund, also made headlines by moving 6,800 ETH (about $22.72 million) from Binance to Aave in a single transaction. The action highlights Aave’s continued relevance as a major DeFi platform for asset allocation and liquidity management. It also suggests that institutional players are maintaining exposure to Aave despite recent price declines.

Backtest Hypothesis

To better evaluate Aave's performance under market corrections, one can apply an event-based backtesting strategy. The primary objective of the backtest is to analyze how Aave (AAVE) has historically performed after experiencing a 10% or greater single-day draw-down in price. This strategy would involve identifying all such days from January 1, 2022, through November 6, 2025, and measuring the subsequent returns over a defined time horizon—typically 30, 60, or 90 days post-event. The results of this backtest can offer insights into whether Aave has historically rebounded or continued to decline after experiencing sharp one-day losses. This approach can be particularly useful for traders and investors assessing Aave’s volatility profile and potential for recovery in the context of broader market conditions.