AAVE Price Analysis: Defi Token AAVE Closes the Week in Losses as Signals Scream Sell

Last Updated July 23rd 2021
2 Min Read
  • Aave reverses the gains after posting a weekly high of $252.
    • Massive losses may be triggered if AAVE breaks the 50 SMA immediate support.
    • Declining network growth is a bearish signal, accentuating Aave price pulldown.

    Aave price skyrocketed earlier this week, posting remarkable gains alongside other decentralized finance tokens like Compound (COMP) and Maker (MKR). However, as the week comes to an end, the gains accrued are axed, with AAVE losing more than 10% in less than 24 hours.

    In the meantime, the Defi token teeters at $216 while bulls seek to keep the price afloat at the 50 Simple Moving Average (SMA) on the four-hour chart. It is worth keeping in mind that two moves will likely emanate from here; an uptrend could resume if the support holds, while the correction may continue if the seller congestion zone shatters.

    What next for Aave price?

    The Moving Average Convergence Divergence (MACD), an indicator following the trend of the asset and calculating its momentum, appears to be turning bearish. As the 12-day Exponential Moving Average (EMA) crossed beneath the 26-day EMA, a call to sell AAVE emerged. The same bearish outlook will be reinforced if the MACD dips below the zero line into the negative region.

    AAVE/USD four-hour chart

     AAVE/USD 4-hour chart 070221

    At the same time, the Relative Strength Index (RSI) adds credence to the narrative after its rejection from the overbought region. Unlike the MACD, the RSI identifies oversold and bearish market conditions of the asset. Therefore, Aave price may drop further as the RSI moves close to the overbought region.

    Over the last three months, the number of new addresses created on the Aave network has dwindled massively. According to Santiment, the network growth metric tracks the number of unique addresses created on the network each day. It illustrates user adoption over time and gives an insight into whether the project is losing or gaining traction.

    Aave network growth model on a downward trend

     AAVE/USD santiment chart 070221

    As the addresses joining the network decrease, Aave price loses momentum, and recovery becomes unsustainable. A low network activity tends to pull AAVE down.

    As mentioned before, Aave’s impending downtrend will be invalidated if bulls hold above the 50 SMA. A break past $225 (short-term resistance) will pave the way for gains eyeing $250 and $300 levels, respectively.

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