Home / Analysis / Crypto / Technical Analysis / Base Leads Layer-2 Activity Behind Aerodrome Finance – Is AERO Set for a Meteoric Rise?

Base Leads Layer-2 Activity Behind Aerodrome Finance – Is AERO Set for a Meteoric Rise?

Last Updated March 25, 2024 2:18 PM
Valdrin Tahiri
Last Updated March 25, 2024 2:18 PM

Key Takeaways

  • Base, Coinbase’s Layer-2 network  has enjoyed a surge in interest in the past two weeks.
  • The reduced transaction fees post the Dencun upgrade likely played a part in this increase.
  • Will Aerodrome Finance continue growing alongside Base as its leading DEX?

Aerodrome Finance, a Decentralized Exchange (DEX) in Base has surged in popularity over the past two months and amounts for nearly half of the Total Value Locked (TVL) for Base.

Despite this meteoric rise, its native token AERO has a market capitalization of $170 million, ranking a measly #2429. This discrepancy between the market capitalization of the exchange and its native token raises the question if the latter will catch up with a similar swift price increase.

Base Activity Increases

Last week, Base counted more than 300,000 users in its DEXes, snatching first place from Polygon with 279,760 and Arbitrum with 198,700 users. A possible reason for this massive surge in activity is the reduction in transaction fees.

After the Dencun upgrade, Layer-2s on Ethereum reaped the benefits of significantly reduced transaction fees, with Base being one of the biggest beneficiaries. Initially, transaction costs on Base  increased because of network congestion, but they have fallen sharply since.

Number of Users in Layer-2 Decentralized Exchanges
Layer-2 DEX Users | Credit: Dune

The increase is also seen in weekly transactions , which reached a new all-time high of 9,588,949, more than double its six-week average of 4,750,012. Base also had more than 10,000 new tokens , higher than 2,800 in Polygon and 1,200 in Arbitrum.

A closer look at the data reveals that the majority of the interest comes from one DEX.

What Protocol Catalyzed the Increase?

The Total Value Locked (TVL) for Base  also reached a new all-time high of slightly over 900 million today. In this aspect, Base still lags behind other Layer-2 solutions such as Blast, Polygon, Optimism and Arbitrum, which all have TVLs over $1 billion. However, neither of them has reached new all-time highs this year, further evidence that interest for Base is on the rise.

Upon closer inspection, more than half of this increase comes from the Aerodrome Finance decentralized exchange, with nearly $400 million in TVL and an increase over 200% during the past month.

Base Total Value Locked
Base TVL Stats | Credit: DeFiLlama

Aerodrome was launched on August 28, 2023 by Velodrome, one of the biggest decentralized exchanges on Optimism.

Its native token is AERO, whose holders can lock their tokens and receive vested tokens as a reward. AERO is currently ranked #2429 based on its market capitalization, but #248 based on its daily volume.

AERO Price Prediction: Rally or Pullback?

Despite its small market cap value, the AERO price has increased rapidly since the start of March. In fact, the price reached a new all-time high of $1.16 today. The increase was the culmination of a 840% upward movement since the start of the month.

The upward movement took the price to the resistance trend line of an ascending wedge (red icon), where it was rejected. The trend line coincides with a Fib resistance area.

AERO Outlines for Future Movement
AERO/USDT Daily Chart | Credit: TradingView

The reaction to this resistance will be key in determining the future trend. If AERO breaks out from the wedge, it can increase by another 56% to the next resistance at $1.70. However, a rejection and breakdown from the wedge can trigger a 35% drop to the $0.70 horizontal support area.

AERO Can Grow Alongside Base

The reduction in transaction fees has been extremely beneficial to Base and in turn its decentralized exchanges. Aerodrome Finance is well positioned to continue growing as the leading DEX on Base. In turn, its native token AERO can continue growing, especially if it breaks above the current resistance.


Was this Article helpful? Yes No