AAVE Protocol Shows Strong Fundamentals, Yet Price Continues to Drop: Here’s the Real Reason
AAVE's metrics scream success—so why does its chart look like a cliff dive?
The Numbers Don't Lie
Total value locked? Up. Protocol revenue? Climbing. User activity? Buzzing. On paper, AAVE is executing its roadmap with precision. The fundamentals paint a picture of a DeFi powerhouse firing on all cylinders—a narrative any analyst would love.
The Market's Cold Shoulder
But crypto markets have never been accused of reading the fine print. While the protocol builds, macro winds shift. Broader market sentiment, that fickle beast, often trumps individual project performance. Lingering regulatory shadows and a classic 'sell the news' dynamic after recent upgrades haven't helped. Sometimes, even a blue-chip token gets caught in the tide.
A Classic Crypto Conundrum
Welcome to decentralized finance, where solid technology and trader psychology engage in a perpetual tug-of-war. It's the age-old Wall Street adage, just with more memes: the market can stay irrational longer than you can stay solvent. For now, AAVE's strong foundation is waiting for the market's mood to catch up.
The AAVE (AAVE) price has dropped over 3% in the past 24 hours to trade at about $185 on Tuesday, December 16, 2025. The mid-cap altcoin, with a fully diluted valuation of about $3.5 billion, has continued to signal bearish sentiment amid the protocol’s impressive fundamentals
What are the Recent Strong Fundamentals for AAVE Protocols
As Coinpedia reported, the United States Securities and Exchange Commission (SEC) formally closed its investigations into the Aave protocol. The AAVE protocol gained much-needed legal clarity after the U.S. SEC ended its investigations without recommending an enforcement action.
The closure of the SEC’s investigation into AAVE coincided with the protocol’s launch of the V4 to further explore the liquidity pool aggregation, a feature that V2 and V3 failed to explore.
As such, the AAVE protocol has gained significant traction in the global mainstream adoption. At press time, the AAVE V3 protocol had a total value locked of above $32 billion, with around $22 billion already borrowed.
The ability for any crypto user globally to borrow and lend on the AAVE protocol will now be expedited by the regulatory clarity in the United States. Moreover, the United States heavily influences other global jurisdictions in their crypto decision.
Why is AAVE Price Declining Amid a Supportive Backdrop
The main reason why Aave Price is dropping today amid supportive fundamentals is due to an ongoing risk off narrative by the wider crypto Investors.
Additionally, the AAVE price action year-to-date has been forming a horizontal consolidation with an upper border of above $355 and a lower border of around $130. The recent drop below a weekly rising logarithmic support trend further confirmed AAVE’s midterm bearish sentiment.
The midterm bearish sentiment for the AAVE price is bolstered by the weekly MACD indicator, which flashed a bearish signal. The weekly MACD and the signal lines dropped below the zero line, amid rising bearish histograms.
As such, the AAVE/USD weekly chart is likely to continue in bearish sentiment amid the end-of-year holidays. The next major support level for AAVE is around $130, which has resulted in a sudden rebound towards $355 in the subsequent weeks.
