Aave’s price has experienced a significant decline of over 10%, coupled with a surge in trading volume by 226% to $577 million.
This downward trend was triggered by a single whale’s $17 million sell-off, leading to increased selling pressure among long perpetual traders. Consequently, liquidations on long positions rose to $1.59 million.
Despite the price drop, robust on-chain capital inflows indicate a bullish sentiment for Aave. An analysis of the protocol’s on-chain activity sheds light on what this could mean for Aave’s [AAVE] price movement.
Strong Capital Inflows Amid Market Fear
Despite the bearish price action, Aave has witnessed a significant increase in capital inflows as measured by Total Value Locked (TVL).
Data from DeFiLlama shows that between December 18th and the present, inflows surged by $1.42 billion, reflecting strong confidence in AAVE’s long-term prospects.
This influx of capital, especially during a market sentiment driven by fear, underscores the belief in Aave’s value proposition.
Source: DefiLlama
Investors tend to lock assets in protocols when anticipating future returns through yield generation and potential price appreciation.
The continuous flow of capital into Aave indicates a positive outlook among market participants, as evidenced by the protocol generating $1.88 million in fees over the past 24 hours and $11.58 million in fees over the last week.
The high fee generation signals ongoing and healthy user engagement on the platform.
Record Profits Reinforce Long-Term Confidence
Despite the price challenges, holding AAVE for the long term reflects confidence in the protocol’s fundamentals.
Aave’s quarterly earnings for Q4 2025 reached $22.56 million, marking the highest in the protocol’s history and highlighting robust protocol usage and investor conviction.
Source: DefiLlama
Strong profitability often leads to a supply-tightening effect, with more investors choosing to hold or accumulate AAVE rather than sell, resulting in a contraction of circulating supply.
Token holder net income remains positive, with $7.11 million generated this quarter, indicating sustained profitability for holders.
On-Chain Activity Signals Slowdown
Despite the capital inflows, on-chain activity has decreased.
Artemis data shows a decline in Transaction Count and Active Users, suggesting reduced network participation compared to previous periods.
However, this decline, coupled with a rise in TVL, may indicate a shift towards a more conviction-driven holder base as less committed traders exit the market.
Source: Artemis
If sidelined users return with improved sentiment, fresh capital inflows could further enhance AAVE’s overall outlook.
Aave’s short-term price action diverges from its underlying strong fundamentals, highlighted by record earnings, increasing TVL, and consistent fee generation.
Final Thoughts
- Aave has witnessed significant on-chain capital inflows, reaching $1.4 billion.
- Quarterly earnings have achieved an all-time high, signaling increased profitability for the protocol.
following sentence:
The cat sat lazily in the sun, enjoying the warmth on its fur.
The lazy cat basked in the sun, relishing the warmth on its fur.