Home Altcoins News AAVE Traders Beware: Critical Levels to Watch Amid Market Uncertainty

AAVE Traders Beware: Critical Levels to Watch Amid Market Uncertainty

AAVE price prediction

The AAVE market is facing increasing bearish pressure as recent data shows an aggressive 11.27% sell-off in the last 24 hours. While this could be a sign of a sustained decline, technical analysis suggests that AAVE is at a critical juncture, leaving traders in anticipation of whether it will recover or continue its downward trend. Here’s a breakdown of what AAVE traders should be watching.

Investor Withdrawal Triggers AAVE Decline

One of the main drivers behind AAVE’s recent price drop is the sharp decline in its Total Value Locked (TVL), which measures the total assets deposited within its decentralized finance (De Fi) protocol. According to DeFi Llama, AAVE’s TVL has dropped to $11.941 billion, reflecting a significant outflow of capital from the platform. This fall in TVL highlights investor caution, with many choosing to withdraw their assets amid growing market uncertainty.

TVL is often seen as an indicator of overall market participation and capital commitment in De Fi platforms. A sustained decline in TVL could signal more downward pressure on AAVE’s price, especially if investors continue to withdraw their funds.

Spike in Active Addresses Signals Further Sell-Offs

Adding to the concerns, the number of active addresses on the AAVE network has surged by 6.85%, reaching over 1,020 at the time of writing. This rise in activity, however, is largely driven by sell-offs rather than new investments, further contributing to the bearish market sentiment.

When combined with the falling TVL, this increase in active addresses suggests that more traders are looking to exit the market, potentially leading to continued price declines.

Major Losses for Long Traders Betting on AAVE

Traders who were betting on a sustained upward movement in AAVE have faced substantial losses. According to Coin glass, $1.91 million has been wiped out from traders who had taken long positions, as the market turned sharply against them.

There’s also an imbalance between long and short positions, with most losses coming from traders who had bet on AAVE’s rise. This further highlights the negative market sentiment surrounding the asset.

Open Interest, which measures the total number of outstanding derivative contracts, has also fallen by 20.23%. This decline indicates that traders are unwinding their positions, signaling a potential continuation of the sell-off.

Technical Analysis Hints at a Possible Reversal

Despite the bearish market indicators, technical analysis offers a glimmer of hope for AAVE traders. The cryptocurrency has reached a critical level on the chart where a horizontal resistance line intersects with a diagonal resistance line. AAVE has reacted positively to this confluence, showing signs of a potential upward move.

If AAVE can maintain its position above this resistance level, it could rally to a target price of $180.74. However, traders should remain cautious, as a failure to hold above this level could see AAVE dropping further, potentially reaching as low as $119.

Key Levels to Watch

  • Resistance Level: $180.74
  • Support Level: $119

If AAVE can hold above the key resistance level, a rally is possible. However, if the resistance fails, traders should prepare for a potential drop to the $119 level.

Conclusion: AAVE Traders at a Critical Juncture

AAVE is currently at a crossroads. On one hand, the decline in TVL and rising sell-offs signal a bearish outlook, but on the other, technical analysis suggests that a rally is possible if key resistance levels hold. For traders, the next few days will be crucial in determining AAVE’s short-term trajectory.

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Evie

Evie is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs.

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