Smart Money's Move Towards AAVE
Crypto investor Arthur Cheong has recently highlighted a significant trend in the cryptocurrency markets. He notes that so-called smart money investors are focusing on AAVE, a token from the decentralized finance (DeFi) platform Aave. This comes as the supply of AAVE on exchanges drops by approximately $18.4 million over the last 30 days. In simple terms, fewer AAVE tokens are available for trading, which often means people are buying and holding them.
AAVE's Market Performance
At the moment, AAVE is priced at $112.84. Cheong believes that the current events are setting up for the next phase of growth in the DeFi sector. This is partly due to BitGo, a company that manages Wrapped Bitcoin (WBTC), shifting its business approach. Wrapped Bitcoin is a version of Bitcoin that can be used in DeFi. By changing how it handles WBTC, BitGo has inadvertently encouraged more big players to enter the DeFi space.
Impact of BitGo's Decision
BitGo's decision has sparked interest in DeFi, with companies like Coinbase hinting at their own Wrapped Bitcoin, called cbBTC. According to Cheong, this strategic shift by BitGo could lead to an increase in the total value locked (TVL) in DeFi, potentially reaching $20 billion in the upcoming months. The TVL represents the total amount of assets secured in DeFi protocols.
Future of DeFi with Wrapped Bitcoin
With Coinbase being a major crypto custodian, its large distribution network could effectively bring more Bitcoin into DeFi. This means that even more people might start using Bitcoin for DeFi activities, rather than just holding it. Other players like Thresold Network are also entering this space with their version, tBTC. Cheong cautions against underestimating these developments, as they indicate a strong potential for growth in DeFi through wrapped or bridged Bitcoin.
Final Thoughts
While these insights from Arthur Cheong are intriguing, it's essential to remember that investing in cryptocurrencies can be risky. As with any investment, doing thorough research and understanding the market dynamics are crucial. Cryptocurrencies, including AAVE and Bitcoin, can be volatile, so it's important to manage your investments wisely.
