AAVE's Capital Share Surges 2% In 2025 Despite Price Stagnation

AAVE, a leading decentralized finance (DeFi) protocol, has seen a significant increase in its capital share within the DeFi ecosystem. As of July 2025, AAVE held 5% of the stablecoin supply, surpassing all centralized finance (CeFi) lenders combined. This growth is a testament to the increasing trust and interest in decentralized lending models, particularly after the SEC’s DeFi roundtable in the second quarter of this year. The streamlining that followed this event has benefited AAVE, with its circulating stablecoins surging from 3% in January to over 5% in July 2025, as per analyst Leon Waidmann. This steady growth indicates a broader shift in how users—both retail and institutional—are allocating their capital within the DeFi space.

Despite this capital growth, AAVE's price has remained stagnant. The price has fluctuated between $248 and $284, with recent rebounds failing to cross previous highs. This stagnation is partly due to a decline in liquidity in the order books over the last two days, contributing to the sideways price action. Between June 24 and July 1, long and short liquidations spiked without sustained direction, leading the price to settle within a tighter band of $260–$270. The momentum has weakened, and as long as the price fails to break above $284 or below $260, AAVE will likely continue to stagnate within this range.

The divergence in deposit and borrowing patterns on AAVE also provides insights into the shifting demand within the DeFi sector. USDC was the most deposited stablecoin, with a volume of $669 million, followed by WETH with $180.3 million. However, borrowing activity was dominated by USDe and USDT, at $604.5 million and $282.7 million, respectively. Interestingly, USDC, despite being heavily deposited, was borrowed less at $87.4 million, while USDe showed higher borrowing but lower deposits. This imbalance suggests a transition in the demand for borrowing more stablecoins, reflecting the evolving needs of DeFi users.

From a revenue standpoint, AAVE has continued to dominate the DeFi lending sector. Since January 2023, its share of total lending revenue has remained between 60% and 80%. In June 2025, this figure stood above 50%, translating to a projected annualized revenue nearing $100 million. AAVE's persistent activity, with 1.46k active addresses and 179k holders, further underscores its strong position in the DeFi landscape. However, other DeFi protocols like DAI and Uniswap maintain stronger day-to-day user activity, indicating that while AAVE leads on capital metrics, other protocols are more active in terms of user engagement.

The stagnation in AAVE's price, despite its growing capital share, raises questions about the broader DeFi landscape. It is possible that other DeFi tokens are facing similar challenges in converting their growing influence into price appreciation. Factors such as market saturation, regulatory uncertainties, or shifts in investor preferences could be at play. Understanding these dynamics is crucial for assessing the long-term prospects of AAVE and the DeFi sector as a whole. As the DeFi landscape continues to evolve, monitoring these factors and their impact on the performance of AAVE and other DeFi tokens will be essential.