Aave, the fifth-largest DeFi protocol according to DefiLlama with a TVL of over $14.02 billion, seems like it is beginning to gather steam. In fact, just yesterday, it jumped by nearly 33% on the back of excellent volumes – suggesting a further run-up may be on the cards.
Following yesterday’s 33% intra-day rally, in one fell swoop, AAVE successfully broke out of the descending wedge and the 200 day moving average. The descending wedge’s bullishness was confirmed with the breakout and the breaching of the 200 DMA could also signal a trend reversal in the altcoin in line with the broader cryptocurrency market.
This also marked AAVE’s breakout from a near 12-month trendline resistance.
AAVE/USDT | Source: TradingView
However, there is a caveat. It had crossed over the 200 DMA several times after July 2021, but wasn’t able to sustain above it. This time too, if it isn’t able to sustain, a recovery might be hard to stage. Additionally, the RSI was found to be over 80 at press time – A sign that overbought levels and some profit booking may be seen first.
However, there are a bunch of other signals that support a bullish view for this altcoin. Data from coinglass.com revealed that there have been a lot of short liquidations. Nearly $2 million worth of shorts were liquidated thanks to the rally.
This can indicate two things – First, the rally was stimulated by heavy short covering. Second, with all these short positions kicked out of the market, the path ahead for the bulls is clearer.
AAVE Total Liquidations | Source: Coinglass.com
On-chain metrics seemed to suggest optimism too, at the time of writing. Supply held by top addresses as a percentage of supply, which had been falling since August 2021, saw a spike since the beginning of
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