AAVE drops by 2.77% as it faces $1 trillion lending goal and cautionary notes from its founder

As of November 6, 2025,

saw a 0.44% decrease over the past 24 hours, settling at $200.39. Over the last week, AAVE declined by 9.79%, dropped 11.95% in the past month, and is down 34.87% compared to a year ago.

Aave (AAVE) is on the verge of a significant milestone, with the total value of all-time loans on its decentralized finance (DeFi) lending platform nearing $1 trillion. Despite recent price swings, this achievement highlights ongoing demand and strong activity on the network. The Aave team shared on its official X account that the protocol is close to reaching this landmark, demonstrating its resilience during broader market downturns. The Horizon Real World Asset (RWA) market has also expanded rapidly, with deposits surpassing $520 million, indicating growing institutional participation and increased real-world use of DeFi lending.

On-chain and derivatives data for Aave point to a positive outlook. There has been a rise in whale transactions, buying activity is strengthening, and funding rates have turned positive, suggesting a possible near-term rebound. Data from Coinglass shows that AAVE’s OI-Weighted Funding Rate reached 0.0089% as of Wednesday, indicating that long positions are now paying shorts—a trend often seen before sharp price recoveries. These improvements in derivatives indicators reflect a cautiously optimistic sentiment in the broader market.

The technical setup for Aave is also attracting attention. Following a steep drop at the end of October, Aave’s price tested a crucial support area near $179.27. This zone is notable as it aligns with the 50% Fibonacci retracement and the lower boundary of a falling wedge pattern. Analysts believe that holding this support could lead to a retest of the $250 level in the coming weeks. The next major test will be whether the price can close above the 78.6% retracement, which is currently at $254.35.

Stani Kulechov, the founder of Aave, has raised concerns about systemic risks in DeFi, especially regarding

oracle price feeds and interest rate curve models. He attributes recent losses on the Stream platform to excessive leverage and a lack of transparency in fund management. Kulechov stresses the importance of standardizing practices, increasing transparency, and strengthening risk controls in treasury management. He argues that current DeFi governance structures are not advanced enough to handle volatile liquidity and challenging market conditions. In his view, these shortcomings pose significant risks to lending protocols and require immediate action from both developers and institutional participants.

Justin Sun, the founder of

, has made a notable move into staking. He recently withdrew 45,000 ETH (worth about $154.5 million) from Aave and deposited it into Lido, a leading Ethereum staking service. This shift has resulted in his Ethereum holdings surpassing those in for the first time, signaling a strategic pivot toward Ethereum’s proof-of-stake system. By staking through Lido, Sun stands to earn regular rewards and help secure the Ethereum network. This move is widely seen as a strong vote of confidence in Ethereum’s long-term prospects and its increasing attractiveness to institutional investors.

MetaAlpha, a prominent crypto investment fund, also drew attention by transferring 6,800 ETH (approximately $22.72 million) from Binance to Aave in a single transaction. This move underscores Aave’s ongoing importance as a key DeFi platform for asset management and liquidity. It also suggests that institutional investors continue to maintain exposure to Aave despite its recent price declines.

Backtest Hypothesis

To more effectively assess Aave’s behavior during market downturns, an event-driven backtesting approach can be used. The main goal is to study how Aave (AAVE) has historically performed following a single-day price drop of 10% or more. This involves identifying all such occurrences from January 1, 2022, to November 6, 2025, and tracking the returns over set periods—typically 30, 60, or 90 days after each event. The findings from this analysis can reveal whether Aave has tended to recover or continue falling after sharp daily losses. This method can be especially valuable for traders and investors evaluating Aave’s volatility and its potential for recovery in the context of wider market trends.