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AAVE Price Creates Bullish Pattern, Potential Rebound Despite Muted Reaction to Aave Labs Roadmap Announcement

Last Updated May 2, 2024 9:44 AM
Valdrin Tahiri
Last Updated May 2, 2024 9:44 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • The AAVE price has traded inside an ascending parallel channel since May 2022.
  • In April, AAVE fell below the channel’s midline, a sign of a bearish trend.
  • Will AAVE’s double bottom lead to a bounce, or is more downside expected?

On May 1, the Aave Labs team made an announcement regarding the roadmap for the future, making several proposals regarding Aave’s role in decentralized finance. The AAVE price did not react to the proposal.

The AAVE price has corrected over 45% since reaching its yearly high on March 13. Nevertheless, AAVE has finally created a higher low relative to the price on April 13. Can this be the first step in beginning an upward trend?

What is Aave 2030?

Aave 2030 introduces several upgrades , including Aave v4. Aave v4 is a described as a major advancement in decentralized finance, due to the Unified Liquidity Layer, which will improve capital efficiency and scalability. It will use Chainlink’s data feeds to provide accurate data feeds when determining interest rates adjustments based on market conditions.

Other interesting developments are a push toward becoming a chain-agnostic liquidity protocol, providing cross-chain liquidity and a focus toward real-world asset tokenization.

Aave is the leading non-liquid staking protocol based in its TVL with over $10 billion. Aave is already present in 12 chains, but the vast majority of its Total Value Locked (TVL)  is in Ethereum. More specifically, $8.80 billion is in Ethereum, while $524 million and $411 million are in Arbitrum and Polygon, respectively, which are Ethereum Layer-2 solutions.

Aave Total Value Locked by Chain
AAVE TVL By Chain | Credit: DeFiLlama

The proposed Cross-Chain Liquidity Layer aims to solve this issue and give a more equal share of TVL to different chains. It will give borrowers immediate access to liquidity through all supported networks.

Another way to achieve this chain agnosticism is through the Aave Network,  which will serve as the hub for its cross-chain strategy. If the Aave DAO adopts the proposal, it will be implemented by the end of 2024.

AAVE Struggles Inside Long-Term Pattern

The weekly time frame chart shows the AAVE price has increased inside a long-term ascending parallel channel since May 2022. While the AAVE price almost broke out from the pattern in March, reaching a high of $153, the upward trend could not be sustained.

Rather, AAVE created a long upper wick (red icon) and fell back inside the channel. After another rejection, the price accelerated its rate of decrease in the beginning of April, creating a large bearish weekly candlestick with a magnitude of nearly 30%.

This took the price below the channel’s midline (red circle), a bearish sign that does not bode well for the future outlook.

AAVE Price Long-Term Movement
AAVE/USDT Weekly Chart | Credit: TradingView

Besides the price action, the RSI an MACD are both trending downward, a sign of a bearish trend. Additionally, the RSI is below 50 and the MACD has made a bearish cross, reinforcing the bearish sentiment.

While all signs point to the long-term trend being bearish, looking at a lower time frame is needed to determine if a short-term bounce will follow.

AAVE Price Prediction: Double Bottom Leads to a Bounce?

Unlike the weekly time frame., the six-hour one gives a more bullish outlook. This is because of both the price action and indicator readings. The price action shows that AAVE has created a double bottom, considered a bullish pattern.

To support the pattern, the RSI and MACD has both generated bullish divergences. As a result, it is likely that a significant bounce will follow. If that happens, AAVE can increase to the descending resistance trend line at $112. This is an upward movement of 35% from the current price.

AAVE Price Downward Trend
AAVE/USDT Six-Hour Chart | Credit: TradingView

However, this will not cause the long-term trend to be bullish. In fact, even if AAVE breaks out from the short-term descending resistance trend line, it will need to move above the long-term channel at $135 to start a bullish trend.

Long-Term Trend Bearish Despite Possibility of a Bounce

To conclude, there was no reaction to the introduction of a new proposal by the Aave team. The long-term AAVE trend is likely still bearish due to the inability to break out from a long-term resistance trend line. However, a short-term bounce toward the closest resistance is likely.

 

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