Aave (AAVE) is showing early signs of recovery after a rough week marked by bearish pressure and a 6% price decline. However, the tides seem to be turning for this major DeFi token, as AAVE bounced by 2.3% in the past 24 hours, bringing its trading price to around $147. Analysts and investors are now watching key indicators that suggest this recovery might gain momentum.
Technical Indicators Signal A Shift
On the daily chart, AAVE’s recent dip appears to be stabilizing, with indicators suggesting a potential trend reversal. The Awesome Oscillator (AO), which measures market momentum, recently flashed green—a bullish signal that could signify a fading downtrend. Though the AO is still in negative territory, hinting that bears haven’t entirely relinquished control, this shift in momentum is promising.
The Chaikin Money Flow (CMF) adds weight to the bullish outlook by flipping positive. This metric, which tracks the balance of buying and selling pressure, suggests that demand for AAVE is beginning to outpace supply. If these trends persist, AAVE could break through resistance levels, with the 0.236 Fibonacci level at $157 as a primary target. Breaching this resistance may pave the way for a rally toward $165, a key level many traders will be watching closely.
Exchange Reserves Hit Record Lows
A key on-chain metric that supports AAVE’s bullish outlook is its shrinking exchange reserves. Data from CryptoQuant reveals that exchange reserves for AAVE have been on a steady decline since mid-October. Low exchange reserves often signal a reduction in selling pressure, as fewer tokens are available on exchanges.
This limited supply dynamic means that if demand for AAVE increases—particularly from investors seeking exposure to the second-largest DeFi protocol—the token could see significant upward momentum. With supply constrained, any surge in demand could amplify price gains, making a solid price recovery more likely in the coming days.
DeFi Growth Fuels AAVE Demand
Another factor bolstering AAVE’s recovery prospects is the strong growth in its decentralized finance (DeFi) ecosystem. Aave currently ranks as the second-largest DeFi protocol, with its Total Value Locked (TVL) reaching $13.05 billion as of press time, according to DeFiLlama. This figure reflects nearly a $500 million increase since the start of the month.
TVL growth is a positive indicator for AAVE’s price, as it reflects greater adoption and activity within the protocol, which, in turn, drives demand for the AAVE token. Since AAVE is the native token that powers the protocol, increased DeFi activity generally supports its price, potentially attracting new buyers to the market.
While AAVE’s recent recovery is promising, it’s worth noting that a significant percentage of token holders may be looking to take profits. Data from IntoTheBlock shows that 57% of AAVE holders are currently in profit, and nearly 18,000 addresses acquired AAVE at prices above $155. If AAVE approaches this level, it could face selling pressure from these investors, potentially creating resistance around the $155-$157 range.
For AAVE to continue its uptrend beyond these resistance levels, it will need sustained buying momentum. Positive market sentiment, driven by growth in AAVE’s DeFi TVL and low exchange reserves, could counterbalance profit-taking, pushing the price higher in the days to come.
With key technical indicators turning positive and on-chain metrics showing favorable trends, AAVE appears poised for a potential price rebound. The decreasing exchange reserves, strong DeFi TVL growth, and a shift in market momentum suggest that bullish investors could drive AAVE’s price toward higher levels. However, the $155-$157 range will be a crucial test, as profit-taking around these levels could impact the recovery’s strength.
If AAVE maintains this momentum and surpasses its resistance, the next rally target of $165 could come into focus. For now, the combination of technical signals and on-chain metrics indicates that AAVE’s bearish pressure may be easing, making this a critical moment for the altcoin’s recovery.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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