Why are Aave investors collectively fleeing? Despite soaring income, over $680 million in TVL has flowed out.

Although DeFi lending protocol Aave (AAVE) has recently performed strongly in terms of yields and revenue, with quarterly earnings rising to $12.686 million—its fourth-highest quarterly record since 2020—on-chain activity has shown abnormal divergence. Data indicates that Aave’s total value locked (TVL) has experienced a outflow of $682 million within just one day, suggesting that long-term investors are withdrawing funds and shifting into stablecoins. This contrasts sharply with the bullish bets from derivatives traders and spot retail investors, creating a clear market paradox. This divergence between earnings and capital outflows has put significant downward pressure on AAVE’s short-term price movement.

Strong Earnings and Revenue Performance: Protocol Fundamentals Continue to Strengthen

The core profitability of the Aave protocol has recently demonstrated robust growth. According to DeFiLlama data, Aave’s quarterly revenue (excluding user incentives) has climbed to $12.686 million, marking the fourth-highest quarterly figure since the protocol’s inception. This surge in data strongly indicates increased activity and utilization, reflecting Aave’s solid position as a top DeFi lending platform.

Additionally, fee generation for this quarter has reached $124.59 million within just over a month. Steady growth in fee generation and revenue lays a solid foundation for assessing Aave’s long-term profitability potential, which should send positive signals to investors. However, market feedback has been unexpectedly mixed: despite holders accumulating $27.3 million in earnings from AAVE assets, capital flight has become increasingly severe.

On-Chain Capital Flight Alert: TVL Loses $682 Million in a Single Day

Contrasting sharply with the impressive financial data, Aave’s network TVL is experiencing large-scale outflows. In just one day, TVL recorded a withdrawal of $682 million, bringing total TVL down to approximately $32.23 billion. Such a scale of fund withdrawal exceeds simple profit-taking and appears more like long-term investors and large capital shifting funds into stablecoins as a risk-averse move.

This “capital flight” scale is concerning; it not only offsets the $27.3 million investor gains accumulated within the protocol but also causes a decline in AAVE’s trading volume. The low trading volume suggests insufficient user activity and weakens the recent 2.4% price increase momentum. Although AAVE’s price has recently risen (about 4% in the past 24 hours), ongoing capital outflows undoubtedly exert heavy downward pressure on the asset’s price.

Market Divergence: Derivatives Longs and Spot Retail Bulls

Interestingly, while long-term on-chain investors are selling and withdrawing, derivatives traders are showing strong bullish sentiment. As of press time, the open interest weighted funding rate has remained positive at 0.0059% over the past 24 hours. This indicates that most of the $282 million liquidity in the market is driven by long positions.

Additionally, spot retail investors are also joining the bullish camp, purchasing $1.03 million worth of AAVE in the past 24 hours, with total weekly purchases approaching $8.89 million.

However, these inflows from spot and derivatives traders are still small compared to the billions of dollars of on-chain investor sell-offs. This stark divergence between traders and long-term holders is the biggest uncertainty factor for AAVE’s current price trend. The withdrawal of long-term capital often signals deeper fundamental concerns, and short-term trading enthusiasm may not be able to sustain against this selling pressure.

Market Interpretation: Systemic Hedging Amid Strong Fundamentals

The surge in Aave’s protocol earnings coupled with the TVL outflow creates a typical market paradox. One possible interpretation is that, despite the protocol’s strong performance, macroeconomic uncertainty or concerns about systemic risks in the broader DeFi ecosystem lead investors to adopt an overall risk-averse stance. As DeFi liquidity infrastructure, Aave’s TVL becomes one of the most sensitive indicators of macro capital flows.

In this context, AAVE’s short-term price movement will depend more on when market sentiment stabilizes and investor confidence in the long term recovers, rather than solely on protocol profitability. If capital outflows persist, AAVE’s price could continue to face downward pressure until the market absorbs this selling.

Conclusion

Aave’s strong revenue growth reflects its solid fundamentals, but the massive outflow of TVL exposes extreme risk sensitivity in the market. Under current conditions, the disconnect between the protocol’s operational strength and investors’ continued risk aversion warrants close attention. The long-term value of the protocol depends on its ability to maintain its revenue advantage amid macroeconomic volatility and ultimately attract long-term capital back into the ecosystem.