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- Aave launches $50M annual buyback to improve AAVE tokenomics.
- AAVE price closely tracks Ethereum’s performance, amplifying swings.
- Short-term selling pressure on exchanges may limit immediate gains.
DeFi powerhouse Aave (AAVE) is stepping up its tokenomics game with a newly approved $50 million annual buyback program. Following a successful pilot launched in May, the initiative aims to stabilize AAVE’s value while addressing market volatility and investor confidence.
Buyback Program Details
The Aave DAO plans weekly purchases ranging from $250K to $1.75 million, determined by protocol revenue and other operational factors. The pilot test alone bought over 94,000 the coin tokens, totaling $22 million, with May recording the largest monthly acquisition of 20,100 tokens. This initial success contributed to a notable price jump, with the coin surging over 50% during the Q2 market recovery.
Although the coin climbed to $385 by August, Q4 headwinds pushed prices below $200, highlighting that market sentiment remains a significant factor alongside deflationary measures.
ETH Correlation Amplifies Price Swings
AAVE’s price is closely linked to Ethereum (ETH) performance. Historical data shows that ETH rallies often amplify AAVE gains, while pullbacks can trigger sharper declines. This correlation underscores how broader DeFi ecosystem trends, led by ETH, influence AAVE’s short-term volatility. Investors eyeing potential ETH rebounds may find opportunities for AAVE to recover if the trend persists.
Also Read: Aave Revenue Soars to $192M as Ethereum Borrowing Surges Past $28B
Exchange Outflows Pose Short-Term Pressure
Recent data from CryptoQuant reveals a seven-month high in exchange inflows, with roughly 10,000 the coin tokens sent weekly for potential sell-offs. This selling pressure could keep AAVE prices subdued in the near term, even as the buyback program scales. The balance between exchange outflows and the deflationary program will be crucial in determining the token’s trajectory.
Looking Ahead
While the coin faces short-term challenges, the long-term outlook could improve if the buyback initiative continues and ETH shows recovery. By reducing circulating supply and creating scarcity, Aave’s deflationary strategy has the potential to strengthen the token’s value and investor confidence over time.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
