The Ethereum (ETH) supply deposited into the Aave lending protocol has reached a new all-time high, exceeding 3 million tokens, according to data from Sentora and Santiment.
This milestone represents a doubling of ETH collateral on Aave within the past year, signaling increased confidence in decentralized finance (DeFi) as users leverage assets for lending and borrowing.
Utilization rates have surged above 94%, surpassing Aave's preferred limit of 92%, which may require increasing collateral thresholds to maintain liquidity and prevent fund redirection to riskier protocols.
Despite a low annual percentage yield (APY) of 1.2% for ETH lenders—lower than validator staking—deposits accelerated due to ETH's price decline and a shift from centralized exchanges.
Aave holds over $32 billion in total value locked (TVL), down from a peak of $44 billion in October, with active loans at $21.4 billion, a decrease from over $30 billion in September.
The protocol dominates DeFi lending, accounting for approximately 50% of the sector's $64 billion in liquidity, and saw 5x TVL growth over the past year, compared to Morpho's rise from $550 million to $6 billion.
Challenges include maintaining security, scalability, and regulatory compliance, while Aave's GHO stablecoin supply adjusted from a record 451 million tokens to 416 million.
Improved liquidation protocols have reduced forced liquidations, boosting user confidence, though high utilization risks complicate fund withdrawals.
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