DefiLlama Says Aave TVL Isn’t Inflated by Looping Trades

DefiLlama founder 0xngmi has rejected claims that aave tvl is overstated by looping trades, saying the platform already filters out borrowed balances.

DefiLlama pushes back on inflation claims

He said DefiLlama does not count borrowed assets in TVL, so circular lending cannot artificially lift the figures shown on its dashboards. Moreover, he argued that the system is designed to exclude recycled capital from the start.

The dispute centers on Ethena-style collateral loops on Aave, which some critics say can make the protocol look larger than it is. However, 0xngmi said the data platform removes borrowed assets from its calculations, preventing looped borrowing from distorting the result.

He also said duplicate calculations tied to Ethena collateral loops on Aave were removed earlier after users reported that some looped positions were appearing more than once in auxiliary breakdowns. That said, DefiLlama’s methodology pages for Aave and Aave v3 state that TVL measures tokens locked in contracts used as collateral to borrow or earn yield.

How DefiLlama says it measures TVL

Those pages also say borrowed coins are not counted toward TVL specifically to avoid inflating the figure through cyclical lending. In other words, DefiLlama methodology aims to show collateral that remains locked, not the same capital reused across multiple positions.

The debate matters because leveraged DeFi strategies built around Aave, Ethena’s USDe, and restaking-linked collateral have become more complex. Moreover, some traders now question whether raw DeFi TVL data still reflects unencumbered liquidity when capital is borrowed, redeployed, and borrowed again.

Growth in Aave and Ethena

Crypto.news data previously showed Aave TVL rising more than 45% in some periods, climbing from roughly $24 billion to about $34.9 billion as network fees increased. As of mid-2025, Ethena’s own TVL reportedly rose from about $1 billion to nearly $11 billion, while protocol revenue increased significantly month over month.

That growth suggests loop-enabled yield strategies are driving a large share of activity across the sector. However, 0xngmi maintains that DefiLlama’s approach prevents TVL from being artificially inflated by recycled borrowing, even if users must still assess how much collateral supports leveraged positions.

Aave remains under close scrutiny as leveraged DeFi strategies evolve, but DefiLlama says its data still avoids double counting. The key issue is not whether borrowing exists, but whether the same capital is counted twice.