While Aave [AAVE] managed to stay resilient amidst recent bearish market trends, the tide seems to be turning for the cryptocurrency. After enjoying a period of growth, AAVE is now facing a potential downturn.
Over the past week, AAVE has been in a bearish trajectory, with the last 24 hours witnessing a notable drop that marked it as the second top loser among major coins.
The dip amounted to a decline of more than 6% during the trading session, indicative of the shifting market sentiment towards AAVE.
This downward trend doesn’t come as a surprise, given the recent bearish signals emitted by AAVE. The cryptocurrency hit a higher high this month than in August, while the Relative Strength Index (RSI) failed to mirror this pattern, signaling a bearish divergence.
As a result of this divergence, AAVE took an 11.95% correction, bringing its price down to $147.20 at the time of writing. This could potentially mark the beginning of a larger correction following its gains from the August lows.
Are AAVE Bears Gearing Up for Further Decline?
Despite the recent pullback, AAVE is still trading at an 85% premium from its August low. Should the bears persist in their push, the next crucial support level to monitor is around $120, representing a possible 16% drop from the current levels.
However, it’s important to note that a shift in market dynamics favoring bullish movements could sway the momentum back towards the bulls.
On-chain data is hinting at an increase in exchange inflows, indicating a growing selling pressure. The total exchange inflows surged from 15,340 AAVE on September 7th to 112,780 AAVE by September 12th.
Conversely, exchange outflow volumes dropped from 182,040 AAVE on September 4th to 85,200 AAVE by October 12th, signaling a decrease in demand that previously fueled AAVE’s price surge.
Furthermore, there has been notable activity in the derivatives market, with a spike in short positions around the $149 range. The accumulation of 2.19 million short positions in that range coincided with significant resistance levels.
Heatmaps also revealed around 2.90 million net long positions at the $151 price level on September 12th, indicating potential liquidations following the price decline, which could be adding to the selling pressure.