Summary:
- The Aave team has proposed to the project’s DAO a plan to introduce a native decentralized, collateralized-backed stablecoin known as GHO that will be pegged to the US Dollar.
- If the community approves, users will mint GHO against their supplied collaterals.
- GHO would make stablecoin borrowing on the Aave Protocol more competitive.
The team at Aave (AAVE) has initiated a governance proposal on the project’s Decentralized Autonomous Organization (DAO) to introduce a native decentralized collateral-backed stablecoin known as GHO pegged to the US dollar.
The governance proposal explains that GHO will be launched on the Aave protocol to allow users ‘to mint GHO against their supplied collaterals.’ GHO will be backed by ‘a diversified set of crypto-assets chosen at the users’ discretion and as borrowers continue earning interest on their underlying collateral. Furthermore, all decisions concerning GHO will be at the sole discretion of the Aave DAO community.
If the proposal succeeds, the Aave team believes that GHO ‘would make stablecoin borrowing on the Aave Protocol more competitive, provide more optionality for stablecoin users and generate additional revenue for the Aave DAO by sending 100% of interest payments on GHO borrows to the DAO.’
The Usage of Stablecoins Will Only Continue to Grow – Aave Team.
Regarding motivation, the Aave team cites the ever-growing stablecoin industry, with its market cap currently at $150 billion. Stablecoins have become the preferred, efficient and borderless way of transferring value on the blockchain.
Consequently, the usage of stablecoins will only continue to grow as crypto and Web3 adoption increases in the months and years to come.
AAVE’s Value Spikes by 13% on News of the GHO Stablecoin.
Concerning price action, the value of AAVE has positively benefited from the news of a potential stablecoin on the Aave Protocol. Before the announcement of the GHO stablecoin, AAVE was trading at roughly $64.
However, as soon as the news started circulating on the web about the probable stablecoin of GHO, its value spiked to a local high of $72.5: a 13.28% increment. The knee-jerk reaction of Aave to the news can be seen in the following 1-hour AAVE/USDT chart.
What the 1-Day AAVE/USDT Chart Says
Zooming out to the 1-day AAVE/USDT chart below, the digital asset is still trading in bear territory below the 50-day (white), 100-day (yellow), and 200-day (green) moving averages. However, the daily MFI, RSI, and MACD hint at a possible bullish move that could assist AAVE in tapping the 50-day moving average at around $80.
But caution is advised longing AAVE in the crypto markets given the macro-economic climate of global inflation and the ongoing war in Ukraine. In addition, Bitcoin’s fate above $20k will determine whether altcoins such as Aave (AAVE) recover from their massive losses in May and June.