AAVE rises 9% after Fed cuts interest rates: Will the V4 upgrade give further growth momentum?

AAVE is emerging as one of the most clearly benefiting names from the recent interest rate cut decision by the US Federal Reserve (Fed).

In the latest trading session, this token recorded an increase of about 9%, climbing to the $205 range at the time of writing. The upward momentum appeared as market focus gradually shifted to Aave (AAVE)'s upcoming V4 upgrade.

Notably, the V4 upgrade introduces a completely new liquidation mechanism designed to optimize capital efficiency while tightening risk control layers across the entire protocol.

These improvements quickly generated a positive ripple effect within the community, as not only did the token price improve, but derivatives market indicators also showed that capital flow and interest are returning to AAVE.

Liquidation mechanism triggers leverage recovery

Following the V4 upgrade announcement, the market responded almost instantly from traders. Activities in the derivatives market—previously quite subdued—quickly became active again as new positions were continuously opened.

Data from CoinGlass shows open contracts increased by approximately $34 million within just 24 hours, marking a clear turning point compared to the sideways trend observed earlier in the week.

Source: CoinGlass This development reflects a significant rise in leverage usage, especially among large-scale traders who are willing to allocate capital to anticipate the upgrade story.

However, the downside of high open contracts is that the market becomes more sensitive to sharp price movements. Therefore, volatility risks remain a non-negligible factor and should be closely monitored in the short term.

Increasing network activity accompanies price rally

On-chain activity shows a clear improvement, aligning with the expanding derivatives market. During the same period, the number of wallet addresses receiving tokens surged, indicating a more active asset flow.

According to data from CryptoQuant, since December 7, the number of addresses receiving tokens has nearly doubled. At the time of writing, this index is close to 1,200 addresses.

Source: CryptoQuant This trend reflects widespread token circulation among wallets, indicating deeper market participation rather than just isolated transactions from whales.

Meanwhile, Aave protocol revenue has also improved significantly. Data from Token Terminal shows weekly network fees increased by about $0.3 million.

Total fees collected reached $15.47 million, mainly from lending interest and liquidation activities across the entire ecosystem.

This revenue growth aligns with increased borrowing activity, further strengthening the close relationship between the platform’s fundamentals and price volatility dynamics.

Source: Token Terminal## Liquidity cluster shapes the main price uptrend

Although prices are recovering, derivatives heatmaps still signal a considerable liquidity wall waiting above the current price zone.

According to liquidation data from CoinGlass, a liquidity cluster worth approximately $1.99 million is concentrated around the $223 level. This area is viewed as a short-term “magnet” attracting prices, especially if upward momentum continues and the overall market environment does not experience adverse volatility.

Source: CoinGlass Conversely, if leverage support weakens, AAVE risks deeper corrections, especially since derivatives positions have been accumulated densely in recent times.