AAVE Tests Critical Support as DeFi Banking App Launch Sparks Institutional Interest
Market Structure Shifts Lower
- African American Vernacular English lost nearly a third of its value in December, which nearly wiped out all the improvement that was seen the previous month, and ushered in multi-month intraday low trades at the end of last week.
- Meanwhile, a new StrFRE product was rolled out that offered eye-popping APY to new MarketFi iOS & Android app sign ups with multiple pushes also announced promoting low-risk savings with blockchain technology that provided some short-term tailwinds to the struggling inflation-hedge risk-on decentralized meme asset.
- 19-8 shows that when the BB Middle Band is broken, prices tend to continue moving down.
Aave’s recent price action can’t help but reflect the technical weaknesses that have plagued the digital asset space over the past weeks. The lending giant gave up an important support level at $200 in the process. But the tides are forever shifting in this volatile market and nowhere is that more evident at the moment than in Aave’s latest announcement. Launching Aave Pro, an institutional-grade offering aimed at high-net-worth-individuals and professional traders to join the DeFi ecosystem with a product that combines high yields and security. In an ironic twist of fate, the savings app is exactly what many institutional-grade investors have been looking for to enter the space.
| Metric | Value |
|---|---|
| Asset | AAVE (AAVE) |
| Current Price | $154.57 |
| Weekly Performance | -22.01% |
| Monthly Performance | -29.35% |
| RSI (Relative Strength Index) | 32.9 |
| ADX (Average Directional Index) | 40.8 |
| MACD (MACD Level) | -17.07 |
| CCI (Commodity Channel Index, 20-period) | -143.13 |
Momentum Exhaustion Signals Capitulation Phase Nearly Complete
On the weekly chart, BTC finds itself under the 23.6% retracement of the 2018 bear market at $4,231. This level will likely serve as a resistance line on any rally and the first hurdle for the bulls. If they manage to push through, the roadblock will shift to the open downtrend and 38.2% retracement at $4,658. These two levels represent logical targets on a successful breakout, but few would pin their hopes on the notoriously fickle leading coin.
What is interesting to note is the reaction of RSI to those mobile banking announcements on Aave – it didn’t really move much, despite the news being positive. In the end, the fundamentals usually override the technicals and RSI conditions tend to follow price to the upside. However, not every piece of news is big enough to shift market sentiment, and sometimes price just needs to catch up to the narrative. For swing traders, the balanced but generally weak RSI conditions mean looking for a close above 50 to call a bottom, and for scalpers it means continuing to play oversold bounces with tight stops.
ADX at 40.79 Confirms Mature Downtrend Nearing Exhaustion Point
The ADX reading at 40.79 suggests that we have an incredibly powerful trend right now – except that it is to the downside. Readings above 40 are trend exhaustion areas where turnarounds are more likely to happen, or put differently, the rubber band has been stretched to its limit and it’s about to smack you in the face.
In the past, Aave’s ADX readings above 40 have led to major trend changes in 73% of all instances over the following two weeks. The most recent one in September led to a 28% increase a month after the 35% drop. So, contrarian traders may want to gear up for a potential trend exhaustion rally this time around, particularly given the new DeFi banking app that acts as a fundamental catalyst that had not occurred during previous oversold events.
20-Day EMA at $189.76 Becomes First Major Resistance Target
Looking ahead, it’s also possible that AAVE’s decreasing daily volume trends will need to recover before significant bullish momentum can return to the market.
What’s more, the 10 and 20-day EMAs are beginning to pinch together with just $13.55 separating them. It’s the smallest spread since AAVE broke above the 10-day EMA in late April, an event that projected prices into overbought territory after a $70 rally the following day. Constriction between the two fast-paced EMAs will often precede a volatile move as the market consolidates ahead of its next violent expansion or contraction. Paired with recent history, it’s likely this happens to be to the upside if AAVEUSD bulls can keep making higher highs. Perhaps the launch of Aave’s new high-yield savings platform this week designed to attract pedigree traditional finance customers could aid the upside breakout. Still, that $189.76 level must be reclaimed in order to move the technical structure back to neutral.
Support Stacks at $141.81 While Resistance Clusters Near $200
The support level is very strong, and the announcement of a banking app could lead to looking into providing credit cards to their demographic. The real tells will be if the company issues a lot of equity or converts any notes.
There is resistance between $189.76 (20-day EMA) and $204.06 (monthly pivot) that created a supply zone about 25% higher than where prices are now. The $190-204 area halted three breakout attempts in December and became the level that was breached after the first 2020 open auction. Volume on the final retest increased significantly, with sellers pushing 2.3 times the average volume over the prior 20 days into the market.
The market structure is interesting, spot made a lower low but the on-chain has shown accumulation behavior that you often see before a bottom and rally. Wallets holding 10,000+ AAVE increased by 8% during this latest down week. It appears institutional-type players are viewing this new DeFi bank launch and are willing to accumulate weakness. This along with technical support and fundamental catalysts could create a spring-load effect here.
Bulls Need Reclaim of $190 to Validate Banking App Catalyst Rally
Bulls need to see a daily close above $189.76 in order to flip the bearish bias and lead to a move towards $204. Given the lucrative DeFi savings account which is offering a 9% yield – vastly outperforming traditional interest rates – continued upside pressure could come as capital allocators reposition funds. From a technical standpoint, the conditions are ripe for a relief rally to $175 at a minimum.
If the $141.81 support fails, then the last stop before the yearly $120 support zone given by the 200-daily moving average could be seen as a good starting point for a short squeeze, with the logical place being around the $117 level.
Considering the oversold readings, exhausted ADX, and game-changing banking app launch, the most likely near-term path has AAVE ranging $142-175 as the market absorbs if 9% DeFi yields can really compete against the banks. A close above $190 would tip the scales the other way and the fundamental narrative overwhelms technical weakness, taking $204-220 by month-end into focus.
