Invested in AAVE, DeFi? Your return per unit of stress might be…

“What is good for the goose is good for the gander.” Unfortunately so, the Decentralized Finance (DeFi) ecosystem is not spared from the current mishap facing the general cryptocurrency market.

According to data from DefiLlama, with a Total Value Locked (TVL) of $81.21b across all DeFi protocols, as the cryptocurrency market struggles, the DeFi ecosystem has recorded a 12.42% decline in its TVL in the last 24 hours.

Amongst the top five DeFi protocols with the largest TVL, Aave Protocol appeared to have suffered the most decline over the last day. At a TVL of $5.23 billion and ranked third on the ranking of DeFi protocols with the largest TVL, in the last 24 hours, Aave registered a 23.05% decline in its TVL.

Data from CoinMarketCap showed that the network’s native token did not perform any better. Down 11% in the last 24 hours, the AAVE token exchanged hands at $59.50 at the time of writing.

Price took a beating

At an 11% decline at press time, the AAVE token was spotted losing the bear against the bears. Trading volume, however, was at a high of 66.80%. It goes without saying that such an uptick without a corresponding growth in price was suggestive of the increased distribution of the AAVE token at the time of writing.

A study of price charts showed that the bulls have had a tough time keeping the price of the AAVE token up since the beginning of April. Notably, April ushered in an era of steady decline for this ghost protocol token. Seeing a high of 54 on 28 March, the Relative Strength Index (RSI) of the AAVE token has since taken on a steady decline to a position below the 50 neutral spot. On 34 at the time of writing and in a downward curve, the AAVE token appeared to be deeply oversold. 

A reading of the Money Flow Index (MFI) of the token, however, hinted at a divergence. Spotted in an upward curve at 54, the MFI was approaching the overbought position. 

Source: TradingView

Maybe, just maybe

On-chain analysis revealed that a price correction might be underway. Spotted at positive 275, at the time of writing, the exchange flow balance showed that more AAVE tokens are being sent to exchanges than are taken out and this is usually followed by a rise in price.

Source: Santiment

However, at a volatility rate of 57%, some caution is to be exercised before FOMO-ing in as bearish sentiment is still up by 44%.

Source: LunarCrush