Author：Encryption Jianghu
- Ethena PT is attracting DeFi capital with higher yields, as a result, challenging Aave’s lending model.
- AAVE prices are showing signs of weakness as their bullish momentum fades.
Ethena [ENA] Principal Tokens (PT)—part of the yield-bearing stablecoin system launched by Ethena Labs—have surged past $1 billion in collateralized supply within just one month.
This surge comes after the assets were approved as accepted collateral on Aave.
The listing opened up fresh utility for Ethena’s synthetic stablecoin ecosystem, allowing users to leverage their PT holdings within DeFi’s largest lending market.
For the uninitiated, PTs are backed by delta-neutral tactics that generate high real yield, typically 15–25% on sUSDe. This has made them very attractive in a yield-starved world while regular DeFi lending rates remain low.
Aave’s interest rates on borrowings are still decreasing
Conversely, Aave [AAVE] witnessed a steady decline in its borrowing rates. Most stablecoin borrow rates are between 2–4%, and it is no longer so enticing for lenders seeking high returns.
The decline could potentially mirror a bigger trend, a declining demand for on-chain leverage and excess capital.
In fact, Ethena’s growth might be accelerating the trend. Instead of parking assets in Aave’s lending pools, capital is now flowing toward sUSDe, drawn by superior yield performance.
Is Ethena draining Aave’s capital pool?
The timing suggests a potential realignment of capital.
As Ethena PT supply fly above $1 Billion in a month of being listed, Aave’s native protocol gauges are all pointing towards stagnation.
Lower borrowing demand suggests less protocol revenue and less value accrual for the AAVE token.
This divergence is threatening as Ethena’s high yields are sucking DeFi liquidity from legacy protocols like Aave.
If the trend continues, Aave may find it difficult to hold its market share, especially with no major innovation or increasing borrowing utility.
AAVE price consolidates under pressure
On the daily chart, AAVE is consolidating below the $270 resistance mark. The earlier bullish trend has flattened, with price action now stuck within a clear supply zone.
While this could reflect temporary indecision, it might also point to weakening fundamentals tied to Aave’s shrinking borrowing activity.
Unless borrowing metrics recover, investor sentiment around AAVE is likely to stay cautious.
As yield competition in DeFi heats up, protocol maturity alone won’t be enough—Aave may need a new catalyst to remain competitive.
