Aave internal conflict 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 cryptocurrency users have been reluctant to admit over the past year but must face. Even the once blue-chip tokens have fallen into a prolonged sideways movement or downtrend under the continuous decline of the overall market, showing little improvement.

However, amid this overall stagnation, 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 basically formed a “round bottom” pattern, possibly indicating a bottom reversal signal. Is this rise merely a temporary boost from market sentiment, or is it the start of a trend driven by fundamentals and structural variables resonance?

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, Morpho began launching Morpho Blue (also the current main version), completely transforming into an independent, permissionless lending base layer, firmly staying at the forefront of the Ethereum ecosystem’s lending sector.

However, in the lending sector, Aave remains the largest and strongest brand leader, which is an undeniable fact. Recently, though, Aave has fallen back into serious governance controversies due to a $51 million “Aave Will Win” funding framework proposed by founder Stani.

This fund was originally planned to support new product development, and the proposal clearly stated that future related brand revenue would 100% flow back to the DAO treasury—this seemingly ideal operation of the project party “giving up control and benefiting the community” unexpectedly ignited long-standing internal conflicts within the DAO.

The reason is that the DAO governance representative, ACI founder Marc Zeller, 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, the DAO’s core developer BGD Labs announced it would exit in April 2026 due to governance friction. The founder’s high voting power once dominated controversial proposals, further pushing the entire DAO into a public tug-of-war over power and fund distribution. Cracks had already appeared within the Aave community as early as December last year; for details, refer to “Can AAVE, which is deeply mired in opposing emotions, still be bought after the second brother cuts losses and clears positions?”

Now, as Aave slows its pace due to governance friction, the “simplicity” of Morpho’s governance model has begun to draw attention. Aave can be considered the first-generation lending governance paradigm of “DAO-led, global parameter adjustment,” where all risk parameters (such as collateral factors and liquidation thresholds) are decided by global DAO votes. While this design ensures overall robustness, it can easily fall into governance bottlenecks—any parameter adjustment needs broad consensus from the community, and any divergence may cause delays, especially during contentious periods that can paralyze decision-making.

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. Each market’s risk parameters (such as LTV, interest rate curves, and liquidation incentives) are set by independent professional risk managers (curators), rather than relying on global DAO votes. This means risks are strictly localized within a single market, and responsibility is spread out to specific curators, greatly increasing decision-making speed without needing to wait for global consensus. Curators can quickly iterate parameters based on actual market conditions, and this design significantly reduces governance friction and decision delays.

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

Data verification: Does it deserve this window?

Let’s take a look at Morpho’s fundamentals and 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 consistently maintained above $9.5 billion, an approximate 80% increase compared to the first half of the year;

The active loan volume within the protocol remained above $3.5 billion in Q3 and Q4, with a year-on-year growth rate of about 80%.

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

User growth is even more intuitive, with the number of quarterly active addresses rapidly expanding 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 do not match Aave, its user growth rate has made it one of the fastest “dark horses” in the lending sector. Especially against the backdrop of the entire DeFi sector generally experiencing pressure and 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 tests. 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 starts to bet

Good fundamental data can only prove that this protocol has a solid foundation, but the greater catalyst that can truly change the market value 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, planning 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.

If viewed solely from a trading perspective, this will bring sustained buying demand for MORPHO. However, if you are familiar with Apollo, you know this may be more of a strategic penetration into DeFi.

Apollo manages nearly $940 billion in assets, and its private credit business is known for pursuing high yields. The on-chain world can provide leverage amplification and global instant liquidity opportunities. Since 2024, it has begun exploring the crypto industry, with RWA as its main battlefield, and partnered with Securitize to tokenize its diversified credit strategies into ACRED, which currently has reached $130 million.

However, the core problem of RWA on-chain has never been issuance but liquidity release. Assets can be tokenized, but without an efficient lending market and leverage environment, their yield potential is difficult to realize. From Apollo’s layout, it is reasonable to speculate that it likely intends to utilize Morpho’s lending market to amplify the yield of its credit products. Because Morpho’s modular lending structure provides a natural adaptation scenario 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 substantial 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 more institutional capital inflow, making it a key infrastructure for amplifying institutional credit products on-chain. This level of institutional endorsement will not only strengthen Morpho’s competitive advantage but also narrow the gap with Aave—especially as Aave is deeply mired in internal governance troubles.

Conclusion

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

Risk Warning: The MORPHA token will encounter a large unlock in March, belonging to Morpho DAO, Morpho Association reserve funds, and core contributors. Short-term liquidity shocks need to be monitored.