Grayscale Research published a report on April 8 arguing that the AAVE governance token is undervalued relative to the protocol’s dominance in decentralized finance. The firm pegs fair value between $80 and $100, with a projected upside to roughly $175 over a one-year horizon.

AAVE was trading near $90 at the time of the report’s release, placing it squarely within the estimated fair-value band. The $175 target represents nearly a 95% premium from current levels.

The case for Aave’s dominance

Aave controls approximately 48% of all on-chain lending activity, according to DeFiLlama data cited in the report. The report, led by Grayscale’s head of research Zach Pandl, draws a direct comparison between Aave and traditional banks. Aave outperforms legacy financial institutions on operational costs, a finding that Grayscale notes is reinforced by research from the Bank of Canada.

Pandl’s team also highlights Aave’s token value accrual mechanism, which involves burning AAVE tokens using revenue generated from lending activity. Fewer tokens in circulation, same or growing demand, and the math tends to work in holders’ favor over time.

Grayscale’s institutional playbook

Grayscale launched the Grayscale Aave Trust in October 2024, giving accredited investors a vehicle to gain AAVE exposure without touching a DeFi wallet. In February 2026, Grayscale filed to convert that trust into a full ETF on NYSE Arca.

If the ETF conversion is approved, AAVE would become one of a very small number of DeFi governance tokens accessible through traditional brokerage accounts.

The risks hiding behind the thesis

Grayscale’s report acknowledges governance-related challenges that have weighed on AAVE’s price. Contributor departures have created friction within the protocol’s decentralized governance structure, and those dynamics have had measurable effects on market sentiment.

The token hit an all-time high near $662 in May 2021. By mid-February 2026, it had climbed to around $126 before pulling back to the $90 range alongside broader market pressure. Even Grayscale’s optimistic $175 target would leave the token well below its historical peak.

Grayscale manages an Aave Trust and is actively pursuing an ETF product. When an asset manager publishes research calling their own portfolio holding undervalued, investors should factor that alignment of interests into their assessment.

What this means for investors

The most interesting implication of Grayscale’s analysis is the framing of Aave as a protocol capable of becoming a “household name” in finance. The 48% market share figure is central to this claim. In traditional finance, a single institution controlling nearly half of an entire lending market would be a regulatory concern. In DeFi, it’s a competitive moat that generates real revenue flowing back to token holders through burns.