Here’s how Ethereum’s price dip drove Aave (AAVE) liquidations to record peaks

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The crypto market experienced wild fluctuations over the past week, with bears taking the charge. Amidst the downside, the Aave protocol saw historic liquidations.

IntoTheBlock revealed that AAVE witnessed approximately $300 million in liquidations last week, the highest ever.

Aave witnessed its largest-ever liquidations this week, with nearly $300M liquidated. Most liquidations stemmed from stablecoin loans against (wst)ETH collateral as ETH dropped by 25%.

The protocol remained strong, adding $6M in profits to the Aave DAO. pic.twitter.com/KPBubM0t9C

— IntoTheBlock (@intotheblock) August 10, 2024

Ethereum’s struggle propel Aave liquidations

Details show that stablecoin loans backed by wstETH (wrapped staked Ethereum) magnified Aave liquidations.

ETH’s 25% price dip sent most collateralized positions under-collateralized. That led to automatic liquidations to ensure the protocol’s financial stability and integrity.

That propelled liquidation volume to historic peaks. Meanwhile, the event added financial value to AAVE.

The Aave earned around $6M in profits from liquidation fees, showcasing the protocol’s resilience.

However, these developments didn’t rescue AAVE’s price from its downside stance. The alt plunged from the weekly high of $108 to $93.51 at press time.

AAVE’s reliance amidst market turmoil

Despite the downside price actions, Aave was among the projects that remained steady as the overall crypto market dipped, generating millions in revenue.

The $6 million returns underscored AAVE’s ability to withstand bearish turmoil.

Founder Stani Kulechov commented on the project’s resilience, highlighting that the AAVE handled market stress across 14 markets on different L1 and L2 platforms, securing $21B in value.

Aave Protocol withstood market stress across 14 active markets on various L1s and L2s, securing $21B worth of value.

Aave Treasury was rewarded with $6M in revenue overnight from decentralized liquidations for keeping the markets safe.

This is why building DeFi is FTW.

— Stani (@StaniKulechov) August 5, 2024

Stani added that decentralized liquidations, a mechanism designed to liquidate collaterals automatically when positions dip below the necessary levels, boosted Aave’s revenue. He stated,

“Aave Treasury was rewarded with $6M in revenue overnight from decentralized liquidations for keeping the markets safe.”

The crypto community responded bullishly to the developments, praising Aave’s stability amid market stress.

The latest market-wide slump catalyzed various liquidations on the Aave protocol, leading to $6M in returns. Wrapped ETH led the pack, with $7.4 million liquidated, generating $802K for AAVE.

Recession fears and geopolitical tension triggered the recent crypto market crash.

AAVE’s current price action

The alt traded with a bearish stance during the publication, following a 2.71% 24-hour plunge to hover at $93.

A near-term outlook suggests more dips for Aave before potential recoveries.

AAVE struggled as bears dominated the broad market over the past seven days. A sudden dip on August 9 plunged the alt from $107 to $100.

Aave extended the downside on August 9, dropping from $100 to $96. The price plummeted further the following day, sending the token toward its press time regions (around $93).

The consecutive price dips shifted AAVE’s trajectory to bearishness. For instance, the Relative Strength Index of around 45 confirms selling momentum behind crypto.

AAVE exhibits a bearish stance despite the network’s operational strength.

Nonetheless, its resilience amid market turmoil reflected a bullish future for the token. AAVE seems well-set to lead the DeFi sector during a full-blown bull run.

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