The recent performance of Aave [AAVE] has been marked by downward pressure, with a 6% decrease in its price over the past week. Nevertheless, the altcoin is now displaying indications of a potential recovery, having risen by 2.3% in the last 24 hours to reach $147 at the time of writing.
Analysis of the daily chart suggests a weakening of the bearish trends. This observation comes after the Awesome Oscillator (AO) changed to a green indicator. Although the AO remains in negative territory, signaling the ongoing control by bears, a reversal in trend could be imminent.
The Chaikin Money Flow (CMF) further bolsters the optimistic outlook by trending upwards and transitioning into positive territory. This development indicates that the buying pressure is currently exceeding the selling pressure, potentially setting the stage for a rally.
If AAVE manages to consolidate its uptrend following these positive signals, the next critical resistance level to overcome would be the 0.236 Fibonacci level at $157. A successful breach of this level could open up the path for a further advance towards the $165 mark.
Besides the technical aspects, on-chain metrics also hint at the possibility of an uptick in the market.
Decline in Exchange Reserves
Recent data reveals a significant decline in AAVE exchange reserves, reaching all-time lows, indicating a potential alleviation of selling pressure.
Analysis from CryptoQuant highlights a consistent reduction in exchange reserves since mid-October, despite occasional price rebounds.
The reduction in exchange reserves implies a scarcity of AAVE on trading platforms for selling purposes. This scenario creates room for a potential price recovery. Additionally, should there be a sudden surge in demand amidst restricted supply on exchanges, AAVE could witness a substantial rebound.
AAVE DeFi TVL Expansion
Another factor contributing to AAVE’s potential price recovery is the continuous growth in its Total Value Locked (TVL) within the decentralized finance (DeFi) sector.
As the second-largest DeFi protocol, AAVE currently boasts a TVL of $13.05 billion, as reported by DeFiLlama, reflecting a $500 million increase since the beginning of the month.
The surge in DeFi activities typically serves as a catalyst for price appreciation, given that AAVE serves as the native token facilitating transactions within the protocol.
Furthermore, the actions of AAVE token holders could play a significant role in shaping the trajectory of the rally. Currently, 57% of token holders are in a profitable position according to IntoTheBlock. Moreover, nearly 18,000 addresses acquired the token above $155, indicating a noteworthy investor sentiment.
Therefore, should AAVE maintain its upward trend, it is expected to encounter resistance around the $155 level if these holders opt to realize their gains.