Aave is a borrowing and lending platform on Avalanche, Polygon, and Ethereum networks. The new Messari data shows the overall market downturn and the Terra debacle substantially affected the borrowing and lending activity within the crypto market during the previous quarter. That saw Aave’s revenue decline in Q2.
Revenue Decline in Q2
Messari discovered that the borrower demand decline amidst dropping crypto prices saw Aave’s revenue decline by 18%. The project’s Q1 revenue stood at $63.5 million. Meanwhile, Aave ended the previous quarter with revenue of $51.8 million.
While the protocol’s revenue dropped, the decline phase differed in different chains in the platform that houses the protocol (Messari data). Aave’s ETH V2 deployment endured the most fall in Q2 as one of its leading users, Celsius, tumbled.
The report showed that Celsius’ primary wallet repaid about 20% of outstanding debt on Aave ETH between June 9 and 13. The massive repayments plus over 50% overall plummets in crypto assets saw Aave’s ETH posting a nearly 36% revenue drop within three months. Aave Ethereum ended the quarter with $30 million in revenue.
However, Aave’s Avalanche deployment revealed a different story. The overall revenue of Avalanche increased by 20% during the previous quarter. Furthermore, Messari discovered Aave’s Avalanche revenue surpassed its ETH-based revenue for May & June.
What drove the revenue surge on Avalanche? Messari stated that Avalanche’s Rush incentives in AVAX tokens triggered most of the activity in Aave’s revenue. The incentives alleviate the borrowing rate beneath the rate to pay to depositors, enabling borrowers to receive almost risk-free yield through re-depositing borrowed funds repeatedly.
Moreover, Aave’s deployments on Arbitrum, Polygon, Optimism, Fantom, and Harmony didn’t post signals for losses or gains within the past quarter (Messari data). Various cryptocurrencies power loans on Aave, from unbacked cryptos to stablecoins.
Stablecoin loans accounted for around 98% of quarterly revenue by Aave since 2021 Q1. Though still high, Messari discovered stablecoin loans accounted for only 82% of the protocol’s revenue during the previous quarter.
Token Terminal shows Aave’s holders increased by 6% during Q2. This metric hovered at 114,572 by June 30. The active user count on the network gained 32% during the 90-day timeframe.
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