Asset manager Grayscale assessed that AAVE, the token of DeFi lending protocol Aave, is currently undervalued. It forecast that if regulations related to real-world assets (RWA) are adjusted in a favourable way, the token could rise to more than double its current price within a year.

On June 17 local time, crypto outlet Cryptopolitan reported that Grayscale Research released its analysis of AAVE in a recent report titled "Bear Market Buying Guide: Valuing Crypto Through Cash Flows."

The report’s key feature is that it applied the discounted cash flow (DCF) model used to value companies in traditional financial markets to crypto projects. Grayscale calculated fair value based on on-chain income and revenue actually generated by the Aave protocol.

Grayscale estimated Aave revenue this year will reach about $60 million. Based on that, it put a baseline fair value range at $80 to $100. But at the time the report was released, AAVE was trading at about $77, below even the lower bound of Grayscale’s fair value estimate.

In a particularly optimistic scenario, Grayscale forecast AAVE could rise to about $175 within a year. Through its official X account, formerly Twitter, the company assessed that "the current price around $75 is undervalued."

The core basis for that optimism is the growth potential of the real-world asset tokenisation market. Grayscale analysed that if governments in various countries clearly set rules related to real-world asset tokenisation, institutional money could flow into DeFi lending platforms.

Real-world asset tokenisation is a method of issuing and trading traditional financial assets such as government bonds, real estate and corporate bonds as blockchain-based tokens. It is being assessed as one of the fastest-growing blockchain fields in global finance recently.

Grayscale forecast that if regulatory clarity is achieved, DeFi protocols such as Aave could use new asset classes as collateral and generate more fee income. It also cited wider participation by institutional investors as an additional growth driver.

Grayscale is also moving to expand Aave-related investment products. The company launched the Grayscale Aave Trust in October 2024, and earlier this year filed with the U.S. Securities and Exchange Commission to launch a spot AAVE ETF. If the ETF is approved, institutional investors would be able to invest in AAVE through existing securities accounts without directly holding cryptocurrency.

The protocol’s scale itself also remains among the top tier in the industry. According to DefiLlama, Aave’s total value locked (TVL) stands at about $13.1 billion across more than 20 blockchain networks. More than $10 billion of that is concentrated on the Ethereum network.

Aave’s revenue scale is also substantial. Annual fee income is about $940 million, and actual protocol revenue is estimated at about $124 million.

But there have also been plenty of negative factors this year. Key developer departures and governance controversies continued, and after an incident in which a North Korea-linked hacking group stole about $300 million from another DeFi project, there was an outflow of deposits across the broader market.

Even in these circumstances, Aave founder Stani Kulechov said in May he would push a "revenue-focused protocol strategy" over the next 12 months. He stressed that DeFi must secure a sustainable and predictable revenue structure to develop beyond a purely speculative token into a company providing real financial services.

In the report, Grayscale also assessed Hyperliquid (HYPE), Uniswap (UNI), Sky (SKY) and Maple (MPL) positively in addition to AAVE. It explained that as more DeFi projects generate real revenue, corporate valuation methods from traditional finance are starting to be applied to the crypto market.

In the industry, key variables for AAVE’s price going forward are seen as the regulatory overhaul for real-world asset tokenisation and whether institutional funds flow in. As the DeFi market starts to be reassessed from speculation-led to revenue-led, attention is growing over whether Aave can become a representative beneficiary.