AAVE overcomes bearish pattern; more gains in store?

Saif Naqvi
Source: Pixabay

Since the launch of Lens Protocol, Aave’s has become a go-to alt for bullish traders. The price has risen by 20% in the last four days, outperforming heavy-hitters such as Ethereum, Solana, Cardano, and XRP in terms of percentage gains. Judging by on-chain volume and a key breakout, Aave’s winning streak could extend by another 10% before slowing down on the chart.

With trading inflows returning to the crypto market over the weekend, investors have bet excessively on Aave’s price. Recent gains were largely due to two factors – the launch of Lens Protocol – a social media platform that allows developers to build web3 social media platforms on the Polygon network, and a risk-on broader market after Bitcoin scaled above $30K.

Source: TradingView

The bullish interval reflected on the hourly chart after Aave broke above a rising wedge setup, overcoming the bearish pattern on Monday morning. The technical development pinned Aave for more near-term success although a breakout was needed above the 20-SMA (see below) to climb higher on the chart.

Favorable Externals

Source: IntoTheBlock

Looking at external market conditions, there were plenty of buyers available to force another breakout. Retail volumes have generally been healthy in the past week and the same even spiked by 54% on the day. Exchange NetFlow’s also dipped in the last 24 hours, indicating that more tokens had left exchanges and entered wallets than vice-versa.

Source: LunarCrush

Social volumes were also consistently high of-late, indicating that FOMO amongst market participants could be another driving factor for Aave’s growth.

Aave Daily Chart: 20-SMA challenges bulls

Source: TradingView

Now that volumes have been established, let’s take a look at potential hurdles on the chart. The daily chart showed that there were not many restrictions until $114, apart from the daily 20-SMA (red). If the MA is flipped bullish, bulls would face little resistance in pushing the price up by another 10%. The next significant areas lay at $1301 and then $157, but broader market conditions would need to remain favorable for an extended rally.

Meanwhile, a rejection at the daily 20-SMA (red) could temporarily halt Aave’s progress and force bulls to establish a foothold at $96-$98. If the aforementioned support is breached due to selling counter-pressure, losses could extend to $87 before the market stabilizes once more.