AAVE Climbs 8% Amid Market Slump–Temp Check Proposal Driving the Price?

Key Takeaways

• The fee switch proposal aims to redistribute protocol revenue to stakers.
• Strategic token buyback could reduce supply and increase value.
• AAVE’s price surged nearly 20%, reflecting investor confidence.

Aave’s recent proposal involving a “fee switch” and a token buyback program has significantly boosted the price of the AAVE token. This proposal , spearheaded by Marc Zeller, aims to modify Aave’s fee structure and introduce a strategic buyback of AAVE tokens from the open market.

The initiative also seeks to reduce the circulating supply of AAVE, potentially increasing its value and improving the platform’s overall financial model. The market has so far reacted positively to this news, with the AAVE token experiencing a substantial rally since it was published on July 25.

Following the announcement, AAVE’s price surged by nearly 20%, reaching over $105. This uptick reflects heightened investor confidence in the protocol’s new economic model, designed to enhance revenue distribution and align incentives more effectively within the Aave ecosystem​.

Fee Switch 

The “fee switch” in the Aave protocol refers to a mechanism designed to redistribute excess revenue generated by the platform. This proposal aims to use the surplus revenue to buy back AAVE tokens from the market and distribute them to stakers, thereby increasing the value of the staked tokens and providing additional incentives for holding and staking AAVE.

This change seeks to create a steady demand for AAVE in the market and enhance the protocol’s overall economic sustainability and efficiency.

The introduction of the fee switch marks a significant shift from the previous “seize and sell” doctrine, which involved selling assets to cover potential losses.

The new model emphasizes a “seize and burn” approach, where surplus revenue is used to buy and burn tokens, reducing supply and potentially increasing token value. This strategy aligns incentives within the Aave ecosystem and aims to make the protocol more resilient and attractive to investors.

AAVE Price Analysis 

AAVE reached a yearly high of $155 on March 12 after an uptrend in mid-June last year, starting from a support level of around $50. This uptrend formed a five-wave pattern, indicating a new bullish phase.

A corrective stage followed, with the price falling to 72 by April 13. This level was retested on July 5, concluding a five-wave ABCDE correction in a descending triangle. The rise since then was likely the start of a new bull phase, as the July 5 low coincided with the 0.786 Fibonacci retracement level. 

If true, we can anticipate a sustained price increase to a new yearly high with the next target set at the 1.618 Fib extension at $236. 

Zooming into the hourly chart, we can see a strong chance AAVE is starting a new lower-degree five-wave impulse that can confirm the previous assumption. Its second corrective sub-wave could have ended on July 25, making the rise since its next advancement. The strongest confirmation will surpass its high of $106, in which case we could expect a near-term target of $154.

If this five-wave pattern develops, it would mean AAVE started a new uptrend, but if the price is rejected at $106 again, there is a chance the price is headed below $70.

About the Author

Nikola Lazic

Nikola Lazic is a cryptocurrency analyst and investor working in the industry since 2017. He holds a bachelor's degree in Sociology, which enables him to better understand the psychology behind the crowd´s positioning. Consequently his preferred analytical tool is Elliott Wave Theory in combination with price action analysis. Combining his experience in trading and investing with knowledge in content writing he strives to bring the most accurate and actionable information. Expertise: Cryptocurrencies, Technical analysis, Elliott Wave Theory, On-chain metrics, Research reports.

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