AAVE faces bearish correction: Is a major sell-off coming?

AAVE

As a seasoned analyst with over a decade of experience in the financial markets, I’ve seen countless bull and bear runs, and the current situation with AAVE doesn’t seem too different. The bearish divergence and the surge in short positions at the $149 price range are clear indicators that the bull run might be slowing down, if not ending temporarily.

In simple terms, Aave (AAVE) was among the rare digital currencies that avoided the negative trends of the recent market. Yet, as they say, what climbs up must eventually come down. It seems that Aave’s surge may have reached its peak, at least temporarily.

For the latter part of this week, AAVE has shown a negative trend. This bearishness has persisted, contributing significantly to its losses over the past day, making it the second-largest decliner among the leading cryptocurrencies within the same timeframe.

It tanked by over 6% during the trading session.

For AAVE, the bearish result wasn’t unexpected given the significant bearish signal it displayed lately. This month, the cryptocurrency reached a new peak, surpassing its highest point in August.

At the same time, the Relative Strength Index (RSI) reached a peak that was lower than its August high, creating a bearish pattern known as a divergence. This suggests potential price weakness ahead.

AAVE faces bearish correction: Is a major sell-off coming?

The shift indicated that the bullish energy was beginning to wane. Since then, it has led to a reduction in price by approximately 11.95%, bringing it down to its current level of 130.65 (press time price).

This could be the start of a significant correction, considering its gains from August lows.

Will AAVE bears push lower?

AAVE currently trades about 85% more than its lowest point in August, even with the recent decline. It’s crucial to watch for a significant support level around the $120 mark should the bears persistently drive prices downward.

That would be equivalent to another 16% pullback from press time levels.

Keep in mind, though, that a change in market trends might favor a positive outcome, which could give strength to the optimistic investors (bulls).

Data from the blockchain suggests a shift in exchange inflows, suggesting an increase in sell pressure. The cumulative flow of AAVE exchanges skyrocketed from approximately 15,340 AAVE on September 7th to around 112,780 AAVE by September 12th.

AAVE faces bearish correction: Is a major sell-off coming?

On September 4th, the outflow volume reached a high of 182,040 AAVE, which decreased to 85,200 AAVE by October 12th.

Confirmation arrived indicating a decrease in demand, which had been driving the recent dramatic surge in the value of the DeFi token.

As a crypto investor, I noticed that AMBCrypto highlighted some significant movements within the derivatives market. Specifically, there seemed to be a spike in short positions around the $149 price point.

Approximately 2.19 million short positions existed within that price range, corresponding with a strong level of resistance.

Read Aave’s [AAVE] Price Prediction 2024–2025

Heatmaps also revealed as much as 2.90 million net longs at the $151 price level on the 12th of September.

Based on my extensive experience in financial markets, it appears that there may have been a considerable amount of liquidations following the price drop. This could be due to investors and traders exiting their positions to limit their losses, thereby increasing the sell pressure. This is a common occurrence during market downturns, as many traders and investors are programmed to cut their losses quickly in order to protect their capital. I have witnessed this phenomenon numerous times throughout my career, and it can indeed significantly impact market movements.

2024-09-13 22:15

Will AAVE bears push lower?

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