Aave (AAVE ) has been riding a strong wave of success, with its token price soaring by 32.08% over the past month. The DeFi giant outperformed many other tokens, delivering an impressive 16.42% gain in just the past week. However, recent market data hints that AAVE’s remarkable rally may be nearing its peak, with signs of a potential pullback looming.
AAVE’s Recent Momentum May Be Short-Lived
At the time of writing, AAVE was trading at $145.80, just $14.21 shy of its previous high of $160.01. According to a technical analysis by AMBCrypto, AAVE’s rally was sparked by a bounce off a critical support level at $138.16. Yet, this uptrend has now encountered a formidable resistance level at $146.69, which coincides with increasing selling pressure.
Analysts warn that if AAVE fails to break this resistance, its price could retrace to the support range between $140.06 and $136.12. Should the market break below this support zone, AAVE’s value could plummet further, potentially bottoming out near $123.18 as selling pressure intensifies.
Rising Exchange Supply – A Red Flag for AAVE
One concerning factor for AAVE bulls is the sudden rise in exchange supply. Data from CryptoQuant shows that 2.5 million AAVE tokens have entered various cryptocurrency exchanges over the last 24 hours. Typically, a rise in exchange supply signals that investors are preparing to sell, which could create a supply surplus and weigh down the token’s price.
The increased supply has also coincided with a shift in Exchange Netflow, indicating that more AAVE tokens are moving to exchanges, possibly for liquidation or trading. This shift has caused a squeeze in demand, leading to forced liquidations of long positions. According to Coinglass, $260.55k worth of AAVE long positions were liquidated in the last 24 hours as market conditions deteriorated.
Indicators Signal Growing Challenges for Bulls
Technical indicators are adding to the bearish sentiment surrounding AAVE. The Bollinger Bands, a popular volatility indicator, reveal that AAVE is currently in an overbought zone. When a token crosses the upper Bollinger Band, as AAVE has, it signals that a price correction may be on the horizon as the asset cools off.
Another sign of potential trouble comes from AAVE’s declining open interest. Open interest, which tracks the total volume of active derivatives contracts, has fallen from $214.71 million on September 11 to $164.56 million. This decline indicates reduced liquidity inflows and suggests that fewer traders are willing to bet on AAVE’s continued rally. This drop in open interest could pave the way for further price declines, potentially driving AAVE below the $140.06 level.
Also Read: Aave Surges 6.54%, Breaks Key Trendline With $764M Volume – Is $260 Next
While Aave’s recent market performance has been stellar, the data indicates that its rally may be short-lived. Rising exchange supply, declining open interest, and technical indicators pointing to overbought conditions all suggest that AAVE could face a significant downturn in the coming days. Traders and investors should exercise caution as the DeFi token navigates these turbulent waters, with the potential for its price to drop below key support levels if bearish sentiment persists.
AAVE’s next move will likely be crucial in determining its market direction—will it break through resistance, or will selling pressure push it back into a downtrend?
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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