Aave Internal Conflict Escalates, Morpho Quietly Doubles: Is the Lending Throne About to Change Hands?

Original | Odaily (@OdailyChina)

Author | Ding Dang (@XiaMiPP)

"Altcoins are dead" has become a consensus that crypto users were reluctant to admit but had to face over the past year. Even former blue-chip tokens have fallen into prolonged sideways movement or gradual declines amidst the broader market's sustained weakness, showing little sign of recovery.

However, amidst this overall downturn, the MORPHO token has rebounded from its early February low of $0.96 to the $1.8-$1.9 range, doubling against the trend. Looking at the daily chart, this rebound has essentially formed a rounded bottom pattern, which could be a signal of a bottom reversal. Is this surge merely a short-term push driven by market sentiment, or the start of a trend fueled by the resonance of fundamental and structural variables?

When the Old Regime Begins to Consume Itself

Morpho was launched as a lending protocol in 2021. Initially, its mechanism was similar to lending protocols like Aave and Compound. However, in 2023, Morpho began rolling out Morpho Blue (now its main version), transforming completely into an independent, permissionless lending base layer, solidifying its position at the forefront of the Ethereum ecosystem's lending track.

Nevertheless, in the lending space, Aave remains the undeniable leader with the largest scale and strongest brand. Recently, however, Aave has once again plunged into severe governance controversy due to a $51 million "Aave Will Win" funding framework proposed by its founder, Stani.

This fund was originally intended to support new product development, and the proposal explicitly stated that future related brand revenue would be 100% returned to the DAO treasury—an ideal move seemingly where the project "relinquishes control and benefits the community." Unexpectedly, it ignited long-simmering internal conflicts within the DAO.

The reason is that Marc Zeller, founder of ACI and a prominent figure in DAO governance, publicly released an "audit" report on February 25th, accusing Labs of low fund utilization, having taken approximately $86 million from the DAO over the past few years with a lack of transparent disclosure. Simultaneously, BGD Labs, a core developer for the DAO, announced its departure scheduled for April 2026 due to governance friction. The founder's high voting power further dominated the controversial proposal, pushing the entire DAO into an open tug-of-war over power and fund allocation. Cracks within the Aave community had already appeared as early as December last year. For details, refer to "The Second-Largest Holder Dumps His Bag. Can AAVE, Mired in Confrontation, Still Be Bought?".

Now, as Aave's pace slows due to governance friction, the "simplicity" of Morpho's governance model is starting to catch many people's attention. Aave represents the first-generation lending governance paradigm of "DAO-led, global parameter adjustment," where all risk parameters (like collateral factors, liquidation thresholds) are decided by global DAO votes. While this design ensures overall robustness, it easily falls into governance bottlenecks—any minor parameter tweak requires broad community consensus, and any disagreement can cause delays, especially during contentious periods, potentially paralyzing decision-making.

In contrast, Morpho follows a second-generation path of modularity and market-driven design: the protocol itself is highly permissionless, allowing anyone to create isolated markets at any time. Risk parameters for each market (like LTV, interest rate curves, liquidation incentives) are set by independent professional risk managers (curators), rather than relying on network-wide DAO votes. This means risks are strictly localized within individual markets, with responsibility distributed to specific curators, significantly speeding up decision-making. There's no need to wait for global consensus; curators can quickly iterate parameters based on actual market conditions. The advantage of this design is a substantial reduction in governance friction and decision-making delays.

When the old regime begins to consume itself internally, it might be the opportunity for new forces to overtake on the curve.

Data Verification: Does It Deserve This Window?

Let's examine Morpho's fundamentals to see if it has the potential to challenge Aave's lending throne. According to Tokenterminal data, in Q3 and Q4 of 2025, the Morpho protocol's TVL consistently remained above $9.5 billion, representing an increase of approximately 80% compared to the first half of the year.

The active loan volume within the protocol also stayed above $3.5 billion in both Q3 and Q4, with a year-on-year increase of about 80%.

Regarding one of the most core metrics for DeFi protocols—protocol revenue—aside from relatively weak performance in Q2, revenue remained stable at around $50 million in other quarters.

User growth is even more直观. Its quarterly active address count rapidly expanded from about 30,000 in Q1 to the 400,000 level, showing strong organic growth momentum.

Although Morpho's current TVL and active loan volume still lag behind Aave's, its user growth rate has already made it one of the most formidable "dark horses" in the lending track. Especially against the backdrop of the entire DeFi sector generally facing pressure and experiencing growing pains in 2025, Morpho's performance can be considered achieving counter-trend high growth, sufficiently proving its product model has withstood market tests. Protocols that can continuously attract capital and users during bear markets often possess stronger explosive potential in the next cycle.

Institutional Variable: When Traditional Capital Starts Betting

Good fundamental data performance only proves the protocol has a solid foundation. However, the greater catalyst that truly changes the market cap curve is the entry of traditional financial giants.

On February 13th, Wall Street asset management giant Apollo Global Management signed a重磅 cooperation agreement with the Morpho Association, the non-profit organization behind Morpho. Apollo plans to gradually acquire up to 90 million MORPHO tokens over the next 48 months, equivalent to approximately 9% of Morpho's total supply. At the current price of $1.8, this is worth about $160 million.

From a purely trading perspective, this will bring sustained buy-side demand for MORPHO. But if you know Apollo, this likely resembles its strategic penetration into DeFi.

Apollo manages assets nearing $940 billion, and its private credit business is known for pursuing high yields. The on-chain world offers opportunities for leverage amplification and global instant liquidity. Since starting to explore the crypto industry in 2024, it has focused on RWA as its main battlefield, partnering with Securitize to tokenize its diversified credit strategy into ACRED, which has now reached a scale of $130 million.

However, the core challenge after tokenizing RWAs has never been issuance, but liquidity释放. Assets can be tokenized, but without efficient lending markets and leverage environments, their yield potential remains difficult to unlock. Looking at Apollo's布局, it's reasonable to speculate that it likely intends to use Morpho's lending markets to amplify the yield of its credit products. Because Morpho's modular lending structure provides a天然适配场景 for RWAs—isolated markets, independent risk parameters, customizable leverage environments. These mechanisms are far more attractive to institutions than parameter博弈 under unified governance.

This speculation is not without basis. Although Morpho is highly permissionless, key parameter options still need to be added to the options库 through Morpho DAO governance. If Apollo holds a significant amount of MORPHO tokens, it will gain corresponding voting power and could potentially推动 the addition of RWA-friendly parameters. If Apollo's intentions materialize as推测, Morpho's modular design might attract accelerated inflows of more institutional capital, making it a key infrastructure for amplifying institutional credit products on-chain. This level of institutional endorsement would not only strengthen Morpho's competitive advantage but also narrow its gap with Aave—especially while Aave is deeply mired in internal governance quagmires.

Conclusion

Aave's governance crisis may continue to drag down its market cap and liquidity in the short term, while Morpho, leveraging its product structural advantages and institutional catalysts, is quietly rewriting the competitive landscape of the lending track. However, whether Morpho can truly撼动 Aave's throne still requires观察 of its TVL's continuous追赶 and more TradFi players following suit. But at least for now, this power transition of the "second-generation lending leader" has already begun.

Risk Warning: MORPHO tokens will undergo a large unlock in March, belonging to the Morpho DAO, Morpho Association reserves, and core contributors. Short-term liquidity冲击 requires close attention.