Decoding Aave’s 13% slide amid its ongoing governance clash
Governance uncertainty clouds Aave’s outlook despite signals of temporary demand returning.
Aave was down 13.34% in the past week. The governance clash in the DeFi protocol’s ecosystem was still a sore point.
The token prices were plunging in recent days amid the ongoing battle between Aave Labs and the DAO over the fee revenue.
The price action suggested a brief bounce is possible, but a recovery might not ensue anytime soon.
Assessing the higher timeframe price trend
The 3-day chart showed the persistent downtrend of Aave [AAVE] in recent months. The former range lows at $220 failed to hold during the October sell-off and were retested as resistance in early November.
At the time of writing, the structure remained bearish on this timeframe. An imbalance (white) around the $160 resistance zone was another notable area where bears could take control of the price action.
To shift the D3 structure bullish, the altcoin prices have to rally past the local high at $207.1.
The 4-hour chart also exhibited a bearish structure. Though AAVE has bounced from the $146.4 local low to reach $155 at the time of writing, the swing structure remained bearish. On the other hand, the MACD moved toward zero to reflect waning bearish momentum.
The CMF climbed past +0.05 to show significant buying pressure in the market. This could see a bounce toward the key resistances overhead.
The Fibonacci retracement levels at $171.85 and $187.58 had confluence with the imbalance on this timeframe at $166-$175.
Which way will Aave trend next?
It is possible that increasing demand and a Bitcoin [BTC] recovery back above $90k and $94.5k could temporarily revive the altcoin markets. In this scenario, a price bounce beyond $187 to reverse the downtrend is possible.
This outcome remains unlikely.
Traders’ call to action- Wait for a bounce to go short
The protocol’s internal struggles were driving down confidence in the token. As one of DeFi’s leading names, there was some evidence that the fundamentals remained solid despite the price volatility.
Given the higher timeframe price trend, as well as the uncertainty around Aave, traders can use a price bounce to key resistance levels to sell the token.
The $167-$178 area would offer shorting opportunities for traders. A move beyond $187 would invalidate the idea and signal a potential trend reversal.
Final Thoughts
- The Aave fee revenue dispute has rattled investor confidence in the token, but the protocol’s fundamentals remained steady.
- AAVE investors and traders need to be wary of price bounces and treat the market as bear-dominated.
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion
