Credits and borrowings in cryptocurrency have long become commonplace. For example, through the Aave protocol. The AAVE governance token is showing positive growth in 2024. What's the matter and is the coin worth your attention?

Break with Gauntlet

Since the end of February, events have developed quite rapidly. It was then that the platform severed relations with Gauntlet, a company that specialized in risk management. One of the reasons for the termination of the four-year cooperation was suspicions about developments that should have led to direct competition.

Head of a company promoting DeFI
Aave Chain Initiative (ACI) Mark Zeller spoke about disagreements with Gauntlet back in November 2022. However then
the decision was made support the new proposal to upgrade. ACI felt that the benefits of having a risk manager outweighed the disadvantages and costs.

There was a lull in March. A new wave of news related to Aave hit in early April.

Changes in fees for token holders

Recently, various DeFi protocols have begun to distribute the income of DAOs (decentralized autonomous organizations) among token holders. Apparently, having noticed this trend, the creators of Aave decided to apply it. Anyway to this
hinted post on X (formerly Twitter) by Mark Zeller:

“Aave's treasury (ether and stablecoins) is now $50 million (2.5 years of transaction costs). DAO's net income is $50 million and growing.” The temperature check (temp check) will activate the “commission switch” for the following week. You can track the treasury balance with
Zapper”

A little earlier, on March 24, 2024, Zeller left
another messageaccording to which the publication of details of fee changes will occur only after 100 million GHO coins (the decentralized stablecoin behind which Aave Protocol stands) have been issued.

It is worth noting: the announcement of the innovation was the latest, but far from the only event at Aave recently. Adjustments to DAI's risk parameters were previously proposed in April.

Risk Options for DAI Upgrade

The essence of the innovations that ACI is proposing is to set the loan-to-value ratio at 0% for all Aave extensions. Besides,
proposal put forward get rid of all sDai incentives in the rewards program starting with the second round.

By and large, this reaction was a response to the D3M (Direct Depositary Module) concept being developed by MakerDAO. Within a month of application, the DAI credit line increased from 0 to 600 million. In the near future, it is planned to expand to 1 billion.

By
opinion Mark Zeller, liquidity injections made on an untested protocol were carried out without any risk management and without paying due attention to security. To support his words, the top manager gives examples of AgEUR and jEUR. In the first case, there was a hack after reckless minting, and in the second there was a long-term decoupling from the collateral asset.

What is the essence of Zeller's proposal? Aave is a cryptocurrency lending platform running on multiple blockchains. The top manager proposes to introduce a ban on DAI as collateral. Typically the deposit could be up to 75%. Interestingly, the story has already been continued. AaveDAO Risk Management Consultant, Chaos Labs, April 5
suggested a less radical step: reduce the possibility of DAI collateral from 75% to 63%, not 0%.

Technical analysis

2024 is shaping up quite well for Aave investors. Since the beginning of the year, the AAVE token has gained more than 14%. This was achieved despite an unsuccessful January, when the decline was over 19%.

And February and the first half of March turned out to be extremely successful for AAVE. During this period, the coin gained more than 90%. After which a correction began to 32%. Now the coin is growing again. Over the past 19 days, only four trading sessions ended in the red.

According to technical analysis, AAVE is in a wide range between support and resistance levels: around $111 and $132, respectively. Indicators show the advantage of bulls over bears. The price is above the 50-day moving average (in blue) and the RSI is above 50 and rising.

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Source: tradingview.com

Conclusion

It's clear that Aave is going through some fundamental changes in early 2024. The site is abandoning old partners and trying to change long-established rules regarding collateral. The action so far has been positive: the AAVE token has increased in price by more than 14% since the beginning of January.

This material and the information contained herein do not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.