AAVE, a major player in the decentralized finance (DeFi) space, continues to outperform competitors in terms of market share and protocol usage. Yet, its native token’s price has struggled to break out of a narrow trading range, leaving investors questioning what’s holding it back.

As of early July 2025, AAVE holds over 5% of the entire circulating stablecoin supply—more than all centralized finance (CeFi) lending platforms combined. This milestone underscores DeFi’s maturing infrastructure and growing appeal, especially in the wake of the U.S. SEC’s regulatory roundtable earlier this year. The event ushered in greater clarity for DeFi protocols, and AAVE was one of the primary beneficiaries of that progress.

In January 2025, AAVE’s share of stablecoin circulation stood at around 3%. By July, it had climbed to over 5%, reflecting a clear shift in user behavior and increasing trust in decentralized lending models. This growth isn’t just cosmetic—it signals deeper capital flows from both retail and institutional participants, many of whom now view DeFi as a viable alternative to traditional finance.

Shifting Patterns in Deposits and Loans

The data reveals notable trends in asset use across AAVE’s protocol. On the deposit side, USDC emerged as the most dominant stablecoin, with users depositing roughly $669 million worth. Wrapped Ethereum (WETH) followed with $180.3 million. However, on the borrowing side, the preferences were different. USDe and USDT led the charts, with borrowing volumes of $604.5 million and $282.7 million, respectively.

Interestingly, while USDC made up the majority of deposits, it was less in demand for borrowing—only $87.4 million was loaned out. USDe flipped the trend, with significantly more borrowing than deposits. This mismatch highlights a transition in borrower demand, with certain stablecoins favored for different financial strategies. It may also reflect evolving sentiment about the risk profiles or yield opportunities tied to each asset.

Dominance in Revenue and Protocol Activity

Since early 2023, AAVE has maintained a significant share of all DeFi lending revenue—ranging from 60% to 80%, according to Dune Analytics. As of June 2025, AAVE still commanded over 50% of total sector revenue, putting its annualized income projection near $100 million. This dominance cements AAVE’s status as the DeFi lending market’s central force.

In terms of user activity, AAVE reported 1,460 active addresses and a total of 179,000 holders, based on data from IntoTheBlock. While these numbers are impressive, they trail behind DeFi peers in certain engagement metrics. For instance, tokens like DAI and Uniswap consistently ranked higher in daily active address counts. This disparity indicates that while AAVE is strong in capital retention, it’s not necessarily the leader in day-to-day user interaction.

Price Action Remains Subdued

Despite strong fundamentals, AAVE’s token price remains stuck in a narrow range. Data from Coinalyze shows that over the past several trading sessions, the token has fluctuated between $248 and $284, with failed attempts to break previous highs. Liquidity on the order books has also thinned out, suggesting a temporary cooling in market participation.

Between June 24 and July 1, both long and short liquidations spiked, but no clear direction followed. This volatility ultimately settled into a sideways movement, narrowing into a tighter band of $260 to $270. Without a decisive move above $284 or below $260, AAVE’s price is likely to continue consolidating.

Technical indicators point to weakening momentum. The reduced volatility and lower trading volumes signal hesitation among investors, even as the protocol itself shows strong performance under the hood. This disconnect suggests that while capital confidence remains high, market sentiment and retail demand haven’t yet caught up.

What’s Missing?

AAVE’s stalling price despite fundamental strength may come down to two key factors: liquidity and engagement. While the protocol is attracting capital, especially in stablecoins, user participation at the interface level is lagging behind. Without renewed activity—either from retail interest or a fresh narrative—AAVE may continue to trade sideways until a new catalyst emerges.

In summary, AAVE remains a foundational pillar of DeFi’s lending ecosystem, with unmatched revenue share and capital inflows. However, the lack of trading momentum and thinning liquidity may keep its token price suppressed—at least for now.