AAVE Price Drops by 7% as DeFi Sentiment Turns Cautious

On Thursday, Aave (AAVE) witnessed a drop of over 7%, forcing its value to slide from $112.32 to $105.03 in 24 hours. The drop in the cryptocurrency was witnessed after a downfall in the overall crypto market. 

At present, AAVE is trading at around $106 with a market capitalization of around $1.6 billion, while the 24-hour trading volume reached approximately $330 million, according to CoinMarketCap.

This drop in the cryptocurrency is another extension of a drop that started earlier in March when AAVE failed to hold above the $115 level. 

AAVE Token Slides with Bearish Momentum

According to the technical indicators, the cryptocurrency linked to the DeFi ecosystem is facing downward pressure. AAVE is currently trading below its 50-day simple moving average, around $112, and remains under the 200-day moving average, around $195. This is clearly giving a signal of a longer downward trend in the AAVE while the entire crypto market faces a consolidation.

Also, the relative strength index is revolving around 41, which shows that the cryptocurrency has entered into neutral territory but is heading toward oversold conditions without strong buying conditions. This negative momentum is also confirmed by MACD, which shows multiple negative drops while multiple shorter-term moving averages give a sell signal. 

According to the technical analysis, AAVE is likely to see major support at $104, while the next resistance level is at $112. Also, for the further rally in crypto above $112 will require breaking the bearish structure. 

(Source: GainMuse)

GainMuse, a popular trader, wrote in a community post on CoinMarketCap, “AAVE slipping under a heavy ceiling. If sellers keep defending this slope, price could slide toward the 100 to 98 support pocket before any stronger response appears.” The cryptocurrency is currently following a dominant falling trendline with a narrowing local structure. According to GainMuse’s analysis, $112 and $114 are immediate reaction zones, while $122 to $125 are major resistance.  

The price drop is coming during the growing escalation of concern in the war between the U.S. and Iran after Iranian officials denied a US ceasefire proposal on Wednesday. This is likely to intensify the turmoil in the financial world and the global energy crisis. In this chaotic situation, the central banks have decided to keep interest rates steady, which has forced investors to reduce their investment in volatile assets like crypto.

When Bitcoin and Ethereum show weakness, DeFi tokens such as AAVE are likely to follow a downward trajectory. The overall crypto market’s fear and greed index is showing an extreme fear condition. 

However, the protocol is still dominating the DeFi sector as it leads the decentralized finance sector with a total value locked near $25 billion across multiple blockchains. Also, it has now executed more than $1 trillion in cumulative lending volume since its inception, which shows its importance in the DeFi lending sector. 

Apart from this, the Aave DAO approved the ARFC proposal for Aave V4 deployment on the Ethereum mainnet on March 23. This upgrade is a security-first approach and includes conservative risk parameters to ensure stability before major rollout. The lab has frozen the V4 codebase after reviewing it and before it goes to a final on-chain vote. This upgrade is expected to resolve liquidity fragmentation, which is likely to make it ready for institutional use cases.

Apart from this, the Aave Chan Initiative announced that it will wind down its operations in the next 4 months after a major funding vote that supported Aave Labs. 

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