Tulip King
Head of Strategy at CounterpartyTV, Crypto Investor
Lending tokens fall short of the sector's strong economics because team conduct and uneven holder returns undermine them. Lending capital is sticky and protocols have pricing power, but Aave rugged its DAO and Compound rugged. Morpho signaled no interest in buybacks; Kamino is silent. Maple's buybacks are small, about a tenth of revenue, and inconsistent. Spark buys back about half its revenue, but revenue is very inconsistent. The sector is great; these projects are not. x.comÂ
Aave's current turmoil is short-term, but how it handles new bad debt and the V4 rollout will define market confidence for the rest of the cycle. Core contributors BGD Labs, ACI and Chaos Labs have all left amid disputes. An oracle glitch caused about $26-27M of liquidations, and an attacker used rsETH from the $293M Kelp DAO exploit as collateral to borrow about $196M of WETH, leaving that much bad debt and frozen rsETH markets. TVL fell about $9B and AAVE dropped 22%. x.comÂ
Chainlink's new 24/7 pricing makes tokenized assets usable for lending when traditional markets close. Aave is adopting it for institutional RWA lending, a massive development for LINK's role in always-on finance. Token Terminal puts tokenized stocks at $4.63 billion in market cap; their growth makes the LINK case even more obvious and insanely bullish. x.com x.comÂ
Tokenization and demand for real economics make DeFi lending, spot and yield tokens extremely appealing on risk-reward. This unrivaled trend will grow DeFi value 50x or more over multiple years, and fast. The altcoin bear market is forcing better token structures: Ethena, Uniswap and Aave are improving unit economics, Chainlink to some extent. Battle-tested Pendle and Morpho, with efficient businesses and institutional ties, will re-rate hard. A DeFi Summer return is nearly certain. x.comÂ
ETH is undervalued because collateral and staking create demand L1 fees miss. Aave V3 has 2.2M WETH supplied and 1.75M borrowed on Ethereum. Yet Base reportedly paid Ethereum ~$15K for September data publishing versus $711K to the Optimism Collective, showing weak L1 capture. Absolute stablecoin growth matters more than share, but is not itself ETH demand. The case strengthens when activity creates sustained demand to hold, borrow against or stake ETH, or raises fee burn relative to issuance. … Show more
Morpho looks set to outperform Aave, with their year-to-date price performance appearing to hit an inflection point. Aave is still dealing with DAO drama and the departure of key contributors, which has overshadowed its V4 launch, and the market is pricing in that execution risk. Morpho keeps taking market share, with RWA collateral at another all-time high of $474M, per Token Terminal data. x.comÂ
Tokenized stocks are starting to generate another source of potential borrowing demand for Aave. Coinbase-issued stock token deposits on Aave V4 Base crossed $10 million, up 514% in 30 days. Eligible holders can borrow USDC without selling their stock exposure, though they face liquidation risk. x.comÂ
Aave is uninvestable because token holders aren't getting the protocol's value. Only about $40-50M has ever gone to token buybacks, against likely hundreds of millions or billions of AAVE inflation used to bootstrap the protocol, and the revenue wasn't used to acquire businesses or grow an Aave empire either. Despite protocol revenue of $907.7M in 2025 by one onchain tally, the token price shows the model isn't working. x.com x.com x.comÂ
Aave's token is tanking because holders have lost faith in leadership. Wasted operating spending, a proposal to issue a new Horizon token that would divert revenue from AAVE, and a forced v4 migration alienated core advocates and users, and business partners such as Ripple are leaving. Users did not want to switch to v4, and v3's longer-term utility is in question. Aave's team replies that the Horizon proposal was removed after feedback and that dominance has risen since 2024. x.com x.com x.comÂ
Tokens that fund buybacks from revenue gained another reason to catch a bid after SEC staff said buybacks alone don't make an otherwise non-security token a security once its protocol is live. More usage can mean more fees for buybacks: Hyperliquid fees buy HYPE, Raydium swap fees buy RAY, and Pump, Jupiter, PancakeSwap, Aster, NEAR, Pendle, Maple and Sky do similar. Uniswap burns UNI from pool fees; Lido's DAO buys LDO by accumulation. Buybacks must be big relative to market cap and new supply. … Show more
AAVE is under pressure as holders send tokens to exchanges, which usually signals selling. A $292M exploit left about $200M of bad debt, and roughly $6.6B has since left the platform. Aave is still a big DeFi project, but it is not in a good spot right now. x.comÂ
