AAVE Price Claws Back Monday Losses as August Liquidations Reach All-Time High

Key Takeaways

• Aave (AAVE) has risen almost 30% since the $76.15 low on Aug. 5.
• The price created its third long lower wick since the start of April.
• Can AAVE finally break out from its long-term channel pattern?

Despite bouts of volatility, AAVE, at the time of writing, traded close to that at the beginning of the year, falling only 8%. While the decrease worsened on Aug. 5, the price of AAVE bounced, saving a breakdown in the process.

Cryptocurrencies that recover the fastest after a crash are often the ones that outperform once the bull market resumes. Will this be the case for AAVE, or will the price continue its underwhelming performance instead?

What’s Behind the Aave Liquidations?

Aug. 5 saw one of the largest crypto crashes in years, similar to the November 2021 FTX crash. Bitcoin fell over 16% but has since recovered, while Ethereum declined more than 30%.

The collapse was felt globally and may have been triggered by the Bank of Japan’s unexpected rate hike. Tech companies also suffered, with Intel falling 26%, its worst single-day performance since 1974.

During the decline, there were heavy liquidations in decentralized finance (DeFi) platforms, amounting to more than $350 million. Total crypto liquidations, in contrast, exceeded $1 billion.

On Aug. 5, AAVE positions took a $233 million hit, pushing total losses for the month to $253 million . This marks the highest monthly loss in Aave’s history, surpassing the previous record set in April, which was $60 million.

Remarkably, the liquidations in August alone have eclipsed the entire amount of liquidations in Aave’s history, making it a truly unprecedented period for the platform.

However, it’s worth noting that the impact of these liquidations on AAVE’s price was relatively muted, as the asset has since recovered from its Monday plunge.

AAVE Still Trades Inside Long-Term Pattern

AAVE’s weekly chart shows that it has been inside an ascending parallel channel since May 2022. While these channels usually contain corrective movements, AAVE has created a positive sentiment by trading in the channel’s upper portion.

The Aug. 5 decline put this price action at risk since it briefly caused a fall below the channel’s midline. However, the following bounce took the price to the upper limit.

Technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) currently provide neutral readings, making it difficult to determine if the trend is bullish or bearish. Specifically, the RSI is 50, and the MACD is 0 (black circles).

Given these mixed signals, analyzing a lower time frame may offer better insights into the trend’s direction.

AAVE Prediction: Can Price Reclaim $100?

The daily chart mirrors the mixed readings observed in the weekly one. AAVE is trading in the upper section of an ascending parallel channel, which rejected it on Aug. 2 (black icon), confirming the $108 area as resistance.

However, on Aug. 5, AAVE created a significant long lower wick, validating the channel’s support trend line. This suggests a bullish intervention to prevent a breakdown from the channel. Notably, this marks the third occurrence of such a long lower wick (white icons).

Despite this short-term strength, the RSI and MACD are neutral. The RSI is at 50, and while the MACD is positive.

AAVE’s price prediction is still unclear based on weekly and daily chart analyses. If the price breaks out above the $110 area, it will likely break out from the short and long-term channels. On the other hand, slipping below the short-term channel could trigger a decline to the $61 horizontal support area.