AAVE Braces for 8% Plunge as Bullish Steam Runs Out

DeFi's darling hits a speed bump—momentum traders bail as AAVE's rally stalls hard. No fancy footwork here, just cold, hard TA signaling trouble ahead.

Watch those support levels like a hawk. Because when crypto giveth, it taketh away twice as fast—usually right after you YOLO in.

Recent Whale Activity fuels Temporary Rally

Following a dip to around $239, an AAVE whale reportedly purchased $15 million worth of tokens, viewing the decline as a buying opportunity. This influx of capital pushed AAVE prices upward by roughly 10%, showing that large investors still have confidence in the token’s medium-to-long-term prospects. However, this rally was short-lived, as the price retraced soon afterward, signaling hesitation among traders about sustaining higher levels.

Such whale moves often influence market sentiment and can trigger short-term rallies. But they also sometimes mask underlying technical weaknesses that only become apparent when broader buying pressure diminishes. For now, while the whale accumulation has provided temporary support, other indicators suggest that caution is warranted.

Technical Analysis Reveals a Stalling Uptrend

Looking closely at AAVE’s daily price action, the asset had maintained a bullish market structure since early May. This means that over weeks, the token made higher highs and higher lows, indicating an overall upward trend. However, over the past two weeks, the trend appears to have stalled. The price has been trapped within a range, repeatedly hitting similar highs and lows without clear direction.

This sideways movement, known as a range-bound or consolidation phase, often signals indecision among traders. During this time, the price oscillates between a defined support and resistance, awaiting a catalyst to push it decisively in one direction. In AAVE’s case, this range has been roughly between $240 and $280.

Additional technical indicators on the daily chart support this view. The Accumulation/Distribution (A/D) indicator, which tracks buying and selling pressure, has not reversed its upward trend but shows signs of slowing accumulation. Similarly, the Chaikin Money FLOW (CMF), which measures capital inflows and outflows, remains positive but has declined significantly from +0.23 to +0.06 in the past ten days. This reduction in capital inflow suggests that buying pressure is waning.

Moreover, the Relative Strength Index (RSI), a momentum oscillator, remains on the bullish side but is edging closer to the neutral 50 line. A drop below 50 WOULD indicate that bearish momentum is gaining ground, potentially foreshadowing a downward move.

Short-Term Chart Signals Growing Bearish Momentum

Zooming in to the 4-hour timeframe offers a clearer picture of the current short-term price dynamics. Here, the consolidation range between $240 and $280 remains intact but is showing signs of weakening support. At the time of writing, Aave had fallen below the mid-range level of $260, which acts as an important pivot point.

Falling below this mid-level can often precede a further decline toward the range bottom or even below it if sellers gain momentum. This recent dip suggests that traders are becoming increasingly cautious and that the demand sustaining higher prices may be fading.

Complementing this, both the A/D indicator and the CMF on the 4-hour chart show that while buying pressure still exists, it is steady rather than growing. The RSI has dropped to approximately 49.3, underlining that bearish momentum is beginning to strengthen.

Key Support and Resistance Levels to Watch

If the price continues to weaken, the first critical level to monitor is the $260 mark. A confirmed break below this support could accelerate selling and lead AAVE to test the lower boundary of the range NEAR $240. Falling beneath $240 would mark a more significant bearish development, opening the door for a deeper correction.

On the other hand, if buyers can defend $260 and reverse the price upward, it could reignite bullish momentum. Overcoming the resistance at $280 would then be the next key hurdle, potentially paving the way for a continuation of the prior uptrend.

What This Means for Traders

For traders, the current setup calls for caution. The combination of a stalling uptrend, slowing capital inflows, and weakening momentum indicators means that an 8% drop is a reasonable near-term scenario. This decline would align with a fall back toward the lower end of the recent trading range.

However, it is important to remember that the DeFi space and AAVE itself are often subject to sudden volatility and shifts driven by broader market sentiment or news. Whale activity and significant capital movements can quickly change the dynamics.

For those already holding AAVE, monitoring the $260 support level closely is crucial. Those looking to enter may want to wait for a clearer breakout above $280 or a strong bounce off $260 to confirm the next directional move.

Conclusion

AAVE’s price action over the past weeks has shown mixed signals. While whale buying triggered a brief rally, technical analysis suggests buying pressure is slowing, and bearish momentum is building on short-term charts. The price dropping below the critical $260 support would signal the likelihood of an 8% correction, potentially bringing the token back toward $240.

As always, traders should combine technical insights with broader market developments and manage risk carefully. Until AAVE decisively breaks out of its current range, it remains in a phase of uncertainty, where both a pullback and a renewed rally are possible.