Ethereum Foundation Makes 'Full DeFi Circle' on Aave

Camila Russo & Olivia Capozzalo
May 29, 2025

gm Defiers!

Today’s big story:

• The Ethereum Foundation is both lending and borrowing using Aave

Plus:

• Top cryptocurrencies are flat or slightly down today on tariff confusion
• Avalanche ecosystem metrics surged in May after gaming integration
• PancakeSwap leads DEXs in 7-day volumes and fees
• Michael Saylor wants to keep his Bitcoin wallets secret, but Arkham outs them
• Solving Liquidity Fragmentation with Soul Protocol [SPONSORED]

Read more below! But first, please give our sponsors some love; they make this newsletter possible.

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Ethereum Foundation Borrows $2M on Aave

After much berating from the Ethereum community, the Ethereum Foundation (EF) is finally putting some of its ETH to work in DeFi.

For years, the Foundation has relied on regular ETH sales to bankroll grants, developer salaries and ecosystem initiatives. Those ETH sales were often made near local price tops, proving EF treasury managers have a knack for timing the market. With the EF now taking stablecoin loans against ETH to fund expenses, ETH holders are hoping the ~22nd largest ETH holder will stop dumping its coins.

Aave Loan

The Foundation’s first foray into DeFi borrowing came on May 29, when Stani Kulechov, Aave’s founder, announced that the EF drew a $2 million loan in GHO, Aave’s native, overcollateralized stablecoin. Wrapped ETH served as collateral, completing what Kulechov called “the full DeFi circle”—the EF not only supplying liquidity but now borrowing against it to meet its cash needs.

The move comes after the Foundation deployed 45,000 ETH—roughly $120 million at the time—across Aave, Spark, and Compound in February, marking its single largest allocation into decentralized lending markets to date. That strategic shift was hailed by many in the community as a sign that the EF was moving toward more sophisticated treasury management, using its ETH as working capital rather than liquidating it.

And yesterday, it actually happened.

GHO Vote of Confidence

To note, by choosing GHO over other stablecoins (USDC, DAI, etc.), the Foundation is effectively casting a vote of confidence in Aave’s native stablecoin. It could help bootstrap liquidity for GHO and validate the value proposition of a more decentralized stablecoin. Relative to the giants of the space, GHO remains microscopic. CoinMarketCap ranks Tether’s USDT at over $150 billion, USDC near $35 billion and DAI around $5 billion—a combined market cap north of $190 billion compared to GHO’s sub-$300 million footprint.

Using a smaller stablecoin carries its risks. Without a direct off-chain redemption mechanism, GHO has at times traded below its $1 peg. Also, a sharp drop in crypto collateral can trigger liquidations, shrinking GHO liquidity pools and leading to high slippage for users exiting positions.

Proof of Concept

That said, the $2 million GHO loan amounts to a sliver of the EF’s holdings of $600 million, according to Arkham. In other words, this initial loan is more proof of concept than wholesale treasury overhaul—and investors will be watching to see if the Foundation scales up its DeFi borrowing strategy without compromising on risk management.

Which leads to the obvious next question: How will the Foundation channel the funds it deposited in Compound and Spark?

Is Staking Next?

Beyond borrowing, the community is also eager to learn whether the EF will stake its remaining ETH. As Ethereum co-founder Vitalik Buterin noted earlier this year, the Foundation has been “considering staking options,” a move that could generate steady rewards while reinforcing network security.

For now, the EF’s GHO loan stands as a landmark moment: the institution that helped birth DeFi is borrowing from it—and in doing so, may have found a way to decouple its operating budget from relentless ETH sell-pressure.

As the experiment unfolds, the broader Ethereum community will be watching closely, eager to see whether DeFi can finally replace those old sell-off cycles with a new era of treasury-driven growth.

With love,

Cami, founder of The Defiant

📈 Markets in the last 24 hrs:

	TICKER	VALUE	24H
	Bitcoin	$106,930	-0.38 %
	Ethereum	$2,645.79	0.30 %
	XRP	$2.28	0.76 %
	BNB	$680.24	-0.55 %
	Solana	$169.35	-0.72 %

This is the news that mattered in the past 24 hrs:

1. BTC has slipped below $107K and total crypto market cap is down 2.6% after a U.S. federal court struck down President Trump’s sweeping trade tariffs, stoking investor uncertainty.
2. Layer 1 blockchain protocol Avalanche had a very good May, with multiple metrics hitting all-time highs this month; the ecosystem growth is likely spurred by the deployment of MMORPG MapleStory on Avalanche in mid-May.
3. PancakeSwap is currently leading decentralized exchange rankings in terms of 7-day trading volumes and fees generated.
4. Michael Saylor says disclosing Strategy’s Bitcoin wallets would pose risks to the firm. Blockchain analytics firm Arkham has outed most of them anyway.

🎬WATCH

In our latest video, we take a look at how stablecoins are bridging the gap between traditional financial systems and digital currencies, making everyday crypto adoption more accessible for businesses and consumers alike.

Earlier this month, payments giant Stripe, which processed $1.4 trillion in payments volume in 2024, announced that it’s stepping into the world of stablecoins with its new Stablecoin Financial Accounts.

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