Aave (AAVE) price surges 19.5% as GENIUS Act fuels investor sentiment

The recent rally is attributed to a combination of macro regulatory developments and strengthening on-chain fundamentals within the Aave ecosystem.

The price of Aave (AAVE), the governance token of the popular decentralized lending protocol, has soared 19.5% over the past seven days and 90.7% over the past month, outperforming the broader cryptocurrency market.

The recent rally is attributed to a combination of macro regulatory developments and strengthening on-chain fundamentals within the Aave ecosystem.

GENIUS Act fuels investor sentiment

A major driver behind AAVE's recent surge is renewed investor interest sparked by progress on the GENIUS Act, a long-anticipated piece of U.S. legislation aimed at regulating the stablecoin market. The bill recently advanced through a key procedural vote in Congress and now awaits one final vote before potential enactment.

If passed, the GENIUS Act would allow banks and approved entities to issue their own stablecoins, provided they adhere to specific requirements. Aave, as a major player in the stablecoin sector, stands to benefit from the resulting institutional adoption. The protocol facilitates lending and borrowing of major stablecoins such as USDC, USDT, and DAI, and introduced its own overcollateralized stablecoin, GHO, in 2023.

Investor confidence in Aave was further buoyed by its involvement with World Liberty Financial (WLFI), a crypto venture backed by Donald Trump. In December, WLFI acquired over 3,300 AAVE tokens as part of a $5 million DeFi-focused investment. The Aave community subsequently approved the launch of Aave v3, offering expanded lending services and an uncommon revenue-sharing deal that grants AaveDAO 7% of WLFI's token supply and 20% of its protocol fees.

Ecosystem fundamentals strengthen as Aave reaches 20% of DeFi TVL

In addition to regulatory tailwinds, Aave's on-chain metrics have shown significant improvement. According to DeFi Llama, the protocol's total value locked (TVL) has surged to approximately $30 billion—a 50% increase from its year-to-date low of $20 billion. This milestone cements Aave's position as Ethereum's top lending platform and the second-largest decentralized application by TVL.

Aave now holds 20% of all DeFi TVL. pic.twitter.com/I8FQChIlgv

Daily protocol fees have also exceeded $1 million, indicating robust user activity. Meanwhile, outstanding debt has grown to around $10 billion, yielding a healthy debt-to-TVL ratio of about 33%. This level of utilization suggests strong demand for Aave's services while maintaining necessary liquidity buffers.

The renewed capital inflows reflect improved market conditions and a broader rotation back into yield-generating DeFi platforms. With its solid performance and strategic positioning, Aave is emerging as a frontrunner in what could be the next phase of DeFi growth.

Despite the recent gains, AAVE remains below its late-2024 peak of $383.49, suggesting room for further upside should current momentum continue.