With the FOMC Reducing Rates, Can AAVE USD Reach $400 By December 2025?

In a significant move this year, the United States Federal Reserve reduced interest rates to the +4% to +4.25% bracket. This action was widely expected and was influenced in part by political dynamics. As fund rates decline, there are strong hopes that decentralized money markets, such as Aave crypto, will excel. Thus, attention has shifted towards AAVE USD.

As reported by Coingecko, the price of Aave has surged by +126% year-to-date and has remained robust over the last month, recording an additional +7%. Nevertheless, in spite of the positive sentiment surrounding crypto, with analysts highlighting bullish forecasts, including robust Aave price predictions, AAVE USDT has shown stability in the latest trading week, gaining about +1%.

(Source: Coingecko)

The relatively subdued price movement occurs as Aave experiences substantial adoption. According to DefiLlama, the decentralized money market is currently overseeing more than $42Bn. Since 2020, Aave’s total value locked (TVL) has been steadily increasing, resulting in heightened protocol revenue. In 2020, Aave’s yearly revenue stood at merely $150,000. By the conclusion of 2024, this figure swelled to over $84M.

(Source: DefiLlama)

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Federal Reserve Cuts Rates To The +4% to +4.25% Range

This year’s revenue is projected to grow further. With three months remaining, Aave crypto has already generated over $77M in revenue, including $35M in earnings.

Considering historical patterns, the current low-interest-rate scenario in the United States creates a favorable atmosphere for crypto platforms. Much like the earlier 2020-2021 crypto surge, which was primarily fueled by DeFi and NFTs, Decentralized finance protocols are likely to draw in more investments.

In a statement on X, Stani Kulechov, the founder of Aave, confidently declared that the rate reduction has created what he terms an “arbitrage opportunity” for Aave USD yields, as they are less tied to declining traditional USD yields.

Today The Federal Reserve lowered their interest rate by 25 bps. From my perspective this is an increase for the arbitrage opportunity for rates in Aave.

Over the past 5 years Aave has been able to beat the us t-bill rates, offering reliable and uncorrelated yield.

My…

— Stani.eth (@StaniKulechov) September 17, 2025

At present, the yield on the 1-year Treasury bill hovers around 3.62%. Kulechov anticipates that treasury yields will continue to fall with additional rate cuts expected in Q4 2025, potentially reaching the +3% to +4% range by 2027. This soft environment is likely to render Aave USD yields, particularly on stablecoins like USDC, more appealing.

Historically, in a low fund rate climate, the USDC available volume rate on Aave v3 has consistently surpassed Treasury bill yields by an average of +0.44%. Research has shown that yields spike further during periods of significant crypto price swings.

(Source: Pangea)

To illustrate, during the 2021 bull trading market, when AAVE USD peaked at $670, AAVE USD circulating supply rates surged to +10%. At that time, treasury bills yielded almost nothing due to aggressive rate cuts implemented to mitigate the effects of the pandemic.

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Aave TVL Increasing, Is AAVE USD Destined for $400?

With the Federal Reserve driving rates lower just as crypto traction is building and more capital is flowing into Decentralized finance, AAVE USD stands to gain significantly.

AAVE’s value is derived from its network usage. The more funds that come in, the greater the likelihood of AAVE ▲4.10% surging. Additionally, with declining rates in TradFi, the yields on Decentralized finance platforms, particularly Aave, become more enticing. Consequently, more users are likely to contribute assets in search of favorable supply rates on Aave.

As leverage and borrowing demand surge on Aave, its TVL is set to rise, enhancing its utility, pushing AAVE USD toward immediate resistance levels. In the short term, the initial liquidation point is identified at $400.

Another factor bolstering AAVE USD is the anticipated Aave V4, scheduled for Q4 2025. This upgrade will implement a Hub-and-Spoke architecture with the potential to transform DeFi liquidity, minimize costs, and amplify the AAVE price.

Aave v4 will provide a cohesive available volume layer that consolidates assets across various chains utilizing Chainlink’s CCIP.

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The post With FOMC Slashing Rates, Will AAVE USD Break $400 By December 2025? appeared first on 99Bitcoins.