The Aave civil war escalates, Morpho quietly doubles: Is the lending throne about to change hands?

Author: Dingdang, Odaily Planet Daily

Altcoins are dead, which has become a consensus that crypto users have been reluctant to admit but must face over the past year. Even former blue-chip tokens have fallen into prolonged sideways trading or downtrends under the continuous decline of the market, showing little sign of recovery.

However, amidst this overall sluggishness, the MORPHO token has rebounded from a low of $0.96 in early February to a range of $1.8-$1.9, doubling against the trend. From the daily chart, this rebound has essentially formed a rounded bottom pattern, possibly signaling a bottom reversal. Is this rise merely a temporary push from market sentiment, or is it the start of a trend driven by fundamental and structural variables resonating together?

When the old dynasty begins to consume itself

Morpho is a lending protocol launched in 2021. Initially, it operated similarly to lending protocols like Aave and Compound, but in 2023, Morpha began to roll out Morpho Blue (the current main version), completely transforming into an independent, permissionless lending infrastructure, firmly positioned at the forefront of the Ethereum ecosystem's lending sector.

However, in the lending space, Aave remains the largest player with the strongest brand, which is an undeniable fact. Recently, Aave has found itself embroiled in serious governance controversies due to a $51 million "Aave Will Win" funding framework proposed by founder Stani.

This funding was originally intended to support new product development, and the proposal clearly stated that future related brand revenues would 100% flow back to the DAO treasury—this seemed like an ideal operation of the project team "handing over control and benefiting the community," but unexpectedly ignited long-standing conflicts within the DAO.

The reason is that Marc Zeller, a representative of DAO governance and founder of ACI, publicly released an "audit" report on February 25, accusing Labs of low fund utilization, having taken approximately $86 million from the DAO over the past few years without transparent disclosure. Meanwhile, core DAO developer BGD Labs announced it would exit in April 2026 due to governance friction. The founder's high voting power has also dominated controversial proposals, further pushing the entire DAO into a public tug-of-war over power and fund distribution. As early as December last year, cracks had already appeared within the Aave community; for details, refer to “Can AAVE, which is deeply mired in opposing sentiments, still be bought?”.

Now, as Aave slows down due to governance friction, Morpho's governance model's "simplicity" has begun to attract attention. Aave can be considered the first-generation lending governance paradigm of "DAO-led, global parameter adjustments," where all risk parameters (such as collateral factors and liquidation thresholds) are decided by DAO-wide voting. While this design ensures overall robustness, it can easily fall into governance bottlenecks—any minor parameter adjustment requires broad consensus from the community, and any disagreement may cause delays, especially during contentious periods.

In contrast, Morpho follows a modular, market-driven second-generation path: the protocol itself is highly permissionless, allowing anyone to create isolated markets at any time. The risk parameters of each market (such as LTV, interest rate curves, liquidation incentives) are set by independent professional risk managers (curators), rather than relying on global DAO voting. This means that risks are strictly localized within individual markets, and responsibilities are dispersed to specific curators, significantly speeding up decision-making without waiting for global consensus. Curators can quickly iterate parameters based on actual market conditions, greatly reducing governance friction and decision delays.

When the old dynasty begins to consume itself, it may be the opportunity for new forces to overtake.

Data validation: Does it deserve this window?

Let's take a look at 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, Morpho's protocol TVL is expected to remain above $9.5 billion, an increase of about 80% compared to the first half of the year;

The scale of active loans within the protocol is also above $3.5 billion in both Q3 and Q4, with a year-on-year growth rate of about 80%.

In terms of one of the core metrics for DeFi protocols—protocol revenue—except for a relatively weak performance in Q2, the other quarters have remained stable around $50 million.

User growth is even more intuitive, with the number of active addresses per quarter rapidly expanding from about 30,000 in Q1 to around 400,000, showing strong organic growth momentum.

Although Morpho's current TVL and active loan scale are still not as large as Aave's, its user growth rate has made it one of the most formidable "dark horses" in the lending sector. Especially against the backdrop of the entire DeFi sector facing pressure and experiencing growing pains in 2025, Morpho's performance can be considered a counter-cyclical high growth, sufficient to prove that its product model has withstood market scrutiny. Protocols that can continuously attract funds and users during a bear market often possess stronger explosive potential in the next cycle.

Institutional variables: When traditional capital begins to bet

Good fundamental data can only prove that this protocol has a solid foundation, but the real catalyst that can change the market cap curve is the entry of traditional financial giants.

On February 13, Wall Street asset management giant Apollo Global Management signed a significant cooperation agreement with Morpho's nonprofit organization, Morpho Association, which states that Apollo plans to gradually acquire up to 90 million MORPHO tokens over the next 48 months, equivalent to about 9% of Morpho's total supply, valued at approximately $160 million based on the current price of $1.8.

From a trading perspective, this will bring continuous buying demand for MORPHO. However, if you know Apollo, you understand that this may resemble a strategic penetration into DeFi.

Apollo manages nearly $940 billion in assets, and its private credit business is known for pursuing high returns; the on-chain world offers opportunities for leverage and global instant liquidity. Since 2024, it has begun to explore the crypto industry, focusing on RWA as its main battlefield, collaborating with Securitize to tokenize its diversified credit strategy into ACRED, which currently has reached a scale of $130 million.

However, the core challenge after RWA is on-chain is not issuance but liquidity release. Assets can be tokenized, but without an efficient lending market and leverage environment, their yield potential is difficult to unlock. From Apollo's layout, it is reasonable to speculate that it likely intends to use Morpho's lending market to amplify the yield of its credit products. Because Morpho's modular lending structure provides a natural fit for RWA—isolated markets, independent risk parameters, customizable leverage environments—these mechanisms are far more attractive to institutions than parameter games under unified governance.

This speculation is not without basis, as Morpho is highly permissionless, but key parameter options still need to be expanded through Morpho DAO governance. If Apollo holds a significant amount of MORPHO tokens, it will gain corresponding voting rights, potentially pushing for the addition of RWA-friendly parameters. If Apollo's intentions materialize as speculated, Morpho's modular design may attract accelerated inflows of 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 the gap with Aave—especially as Aave is deeply mired in internal governance issues.

Conclusion

Aave's governance crisis may continue to weigh on its market cap and liquidity in the short term, while Morpho, leveraging its product structure advantages and institutional catalysts, is quietly rewriting the competitive landscape of the lending sector. However, whether Morpho can truly shake Aave's throne still requires observation of its TVL's continued catch-up and the follow-up of more TradFi players. But at least for now, this power transition of the "second generation of lending" has already begun.

Risk Warning: The MORPHA token will face a large unlock in March, with the beneficiaries being Morpho DAO, Morpho Association reserves, and core contributors; short-term liquidity impacts should be closely monitored.