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Why is AERO Pumping?

Aerodrome Finance is up 100% this week. Here's why.
Jack Inabinet Jack Inabinet Mar 12, 20242 min read
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market analysis Why is AERO Pumping?

Aerodrome Finance, a liquidity protocol built on Base, has surged in price by 100% over the past four days. What catalyst kicked off the rally, and will AERO continue to moon?

AERO roared to life on February 26 after the Base Ecosystem Fund disclosed an investment in Aerodrome. Token price doubled within two days of the announcement and Coinbase’s public vote of confidence marked the beginning of the monstrous 8X rally that has since occurred!

At its current fully diluted valuation (FDV) of $700M, Aerodrome boasts a FDV/TVL of 2.5, exceeding Curve’s ratio of 0.6 (another DEX which uses inflationary tokenomics to incentivize liquidity) and Velodrome’s ratio of 1.2 – the protocol that Aerodrome was forked from.

While a comparatively high FDV/TVL indicates that AERO’s valuation may be stretched given the current amount of liquidity locked in the Protocol, Aerodrome has a compelling growth story that helps to justify some of its richness.

Coinbase’s endorsement resulted in an uptick in total value locked (TVL) and an explosion in demand for swaps, which increased by a respective 103% and 153% during the past month.

Source: Token Terminal

Ethereum’s EIP-4844 upgrade, which occurs tomorrow, promises to slash gas costs for Layer 2s by orders of magnitude.

The lower transaction fees that result for Aerodrome’s users should theoretically increase the number of transactions that they are willing to perform, causing volumes to further rise, jacking up yields, and attracting even more TVL to Aerodrome!

While Coinbase has provided no real clarity on whether Base will have a token or conduct an airdrop, speculation has been mounting that the chain will spin off from its publicly traded exchange parent in order to launch a token and airdrop it to early users…

Confirmation that this is indeed the direction Coinbase is looking to go would drive a massive influx of speculative activity to Base as users attempt to position themselves for future airdrops, driving increased swap volumes and liquidity to the chain’s premier swap venue: Aerodrome!

 

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Jack Inabinet

Written by Jack Inabinet

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Jack Inabinet is a Senior Analyst with a passion for exploring the bleeding edge of crypto and finance. Prior to joining Bankless, Jack worked as an analyst at HAL Real Estate where he conducted market research and financial analysis for commercial apartment development and acquisition activities in the Seattle region. He graduated from the University of Washington’s Michael G. Foster School of Business and remains based out of the Seattle area.

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