If you bought $1,000 worth of AAVE coins on January 1 this year they were just $70 a coin, you would have cashed out $8,299 at its May peak. However, if you cash out at its current price of $343, your initial investment would now be worth $4,899. Still a healthy level of gains.

Source – Binance

AAVE certainly earns a spot in the list of cryptocurrencies that have delivered impressive gains. Although its performance was certainly influenced by the heavily bullish crypto market conditions in the first five months. However, AAVE also attributes its growth to the popularity of decentralized finance, especially DeFi Lending.

Is AAVE still worth buying in July 2021?

Taking out loans for the right reasons can be a gamechanger when a sure-bet opportunity arises. Centralized institutions such as banks offer loans but the process might take time and require substantial collateral and strict regulatory requirements, making such loans less accessible to the masses. AAVE is the native cryptocurrency on the Aave DeFi lending protocol which was created to facilitate lending in a decentralized ecosystem.

Aave initially started as ETHLend with a peer-to-peer lending approach through which users would wait to find another person to lend them the required amount. However, its rebrand came with a shift to a peer-to-contract approach where users can borrow money from a pooled fund, thus eliminating the delays with finding a match. The approach allows users to pool their funds into a smart contract, through which they earn a share of the interest generated when borrowers repay their loan.

Flash loans are among the top reasons for AAVE’s popularity. They are loans that borrowers can take out without collateral but the caveat is that they have to be repaid with interest within the same block. In other words, they are loans that have to be repaid within a short time. Users can take out huge loans which can be used to quickly take advantage of arbitrage opportunities in the crypto market. Aave has more than $3 billion worth of total value locked in its liquidity protocol.

AAVE’s flash loans will remain popular for as long as there are arbitrage opportunities in the market. It is worth purchasing for two reasons. You can buy the cryptocurrency so that you can participate in a smart contract liquidity pool, which will provide passive income through DeFi. It is a great way of earning as you hodl your AAVE because it might reach new all-time highs in the future.

How much growth potential can AAVE unlock?

AAVE’s ability to unlock more value depends on the popularity of its platform. Fortunately, things seem to be working out well considering that in 2020, it was awarded an electronic money license by the Financial Conduct Authority (FCA) in the UK. The license makes it easier for the DeFi lending protocol to onboard more users. This means more people will buy AAVE, thus increasing its market cap and subsequently its price.

AAVE currently has a market cap of $3.92 billion with 12.8 million coins in circulating supply and a maximum supply of 16 million coins. The limited amount of tokens coupled with the high levels of utility on the platform means AAVE still has a lot of room for growth. For example, if its market cap reaches $10 billion with the current circulating supply, its price will rally to $799 which is more than double its current price range. Such potential combined with the opportunity to earn passively through staking and participating in liquidity pools is enough incentive to buy AAVE.