Here’s the AAVE Price If Yield Spreads Between Aave and Morpho Finally Collapse

Aave (AAVE) is pushing beyond crypto lending and into real-world assets as new institutional interest builds. The protocol shared plans to tokenize solar infrastructure for DeFi financing.

However, Grayscale filed to convert its Aave trust into a spot ETF, which could bring AAVE exposure to traditional markets. These developments add a stronger long-term narrative around the protocol.

But in the short term, traders are focused on something else: yield competition. Aave’s lending rates are being compared more directly to Morpho, and that gap may not last. The AAVE price is trading around $126.50.

• AAVE Yield “Premium” May Be Mispriced
• Why the Spread May Not Last For AAVE
• Real-World Assets and ETF Momentum Add Support
• AAVE Price Targets If the Spread Collapses

AAVE Yield “Premium” May Be Mispriced

A new thread from Tanaka (@Tanaka_L2) sparked attention by pointing out that Morpho has been paying meaningfully higher USDC yields than Aave. Over the past year, Gauntlet Prime USDC on Morpho delivered roughly 150 basis points more than Aave’s USDC supply rate.

Both platforms have survived multiple stress cycles, and both are viewed as blue-chip DeFi lending venues. That’s why the spread looks strange. If the risk is similar, why is Morpho paying more?

Tanaka argues that the answer is not simple market inefficiency, but structural differences in who supplies capital and how each protocol is designed.

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One key point from Tanaka is that Aave’s USDC suppliers tend to be protocol treasuries, DAOs, and crypto-native capital. This creates broad distribution, deep liquidity, and lower maintenance funding. Aave is built for composability across DeFi, and that attracts long-term sticky liquidity.

Morpho, on the other hand, has more concentrated whale participation, along with funds and institutional partnerships. These vaults often run at higher utilization, which pushes yields up. Morpho is optimized for tailored markets, which can deliver higher returns but also introduces lender concentration risk.

In other words, the yield gap exists because these are not identical products. They reach different capital bases, and that leads to different equilibrium rates.

Why the Spread May Not Last For AAVE

Tanaka’s main takeaway is that this yield gap should shrink over time. Vault abstraction risk is fading, allocators are becoming more comfortable with curated markets, and the spread is already tightening.

He also pointed out that capital is mobile. Large players like Ethena allocating across both Aave and Morpho show that liquidity can rotate quickly when rates diverge.

If yields converge, Aave’s perceived “premium” could be repriced. In that scenario, AAVE may benefit as the market starts viewing the protocol as undervalued relative to its competitors.

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Real-World Assets and ETF Momentum Add Support

Beyond lending rates, Aave is also expanding its narrative. Founder Stani Kulechov recently outlined a strategy to tokenize solar assets and bring renewable infrastructure financing on-chain. That opens the door to a much larger collateral market than crypto alone.

Grayscale’s filing for a spot Aave ETF adds another layer. Even if approval takes time, it signals that Wall Street demand for altcoin exposure is still building. More accessibility and liquidity could strengthen Aave’s position over the long run.

These catalysts don’t solve yield competition overnight, but they help reinforce Aave’s role as a core DeFi protocol.

AAVE Price Targets If the Spread Collapses

If Aave’s yield discount narrows and capital rotates back toward the protocol, AAVE could start reclaiming higher levels.

The first upside zone sits near $140, which marks the next key resistance area from recent trading. A move above resistance could push the AAVE price toward $160, especially if the ETF story keeps gaining attention.

If weakness returns and the yield spread remains, AAVE could slip back to $115, with $100 as the next major support.

The main point is that if Aave and Morpho yields move closer together, AAVE may have room to catch up.