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AAVE’s Bull Run Shows Signs of Fatigue

Aave (AAVE) token reached a peak of $326 over the weekend, marking a 175% increase from its April low, and is trading near December 2024 highs with a market cap approaching $5 billion. The token has benefited from robust network growth, with total value locked (TVL) in its ecosystem hitting a record $41 billion, nearly double the start of the year, according to DeFiLlama.

Liquidity supplied on the platform has surged to over $63 billion, surpassing many U.S. banks in scale. This expansion has driven monthly fees to $80 million in August, up 7.2% from July’s $74.7 million and significantly higher than June’s $50 million, as reported by TokenTerminal. Aave’s treasury has also grown, now holding $235 million in assets, up from $176 million in April.

Indicators of a Slowdown

Despite these positive fundamentals, on-chain data suggests momentum may be waning. Whale holdings, which total 183,116 AAVE tokens valued at over $59 million, increased by 15% in the past 30 days but have seen no new accumulation since August 14, based on Nansen data.

Smart money investors, known for strategic buying and selling, have reduced their holdings to 293,000 tokens from a monthly high of 294,000, indicating expectations of a price pullback. Additionally, the token supply on exchanges has risen to 5.42 million from a low of 5.4 million this month, signaling increased selling pressure.

Technical Analysis Points to Risk

On the weekly chart, AAVE has been in an uptrend, climbing from an April low of $113 to a high of $377. The price remains above the 50-week and 100-week exponential moving averages, which is typically bullish. However, a double-top pattern has formed with a neckline at $113.8, suggesting potential downside.

As long as the price stays below the double-top point of $377, a pullback to the 100-day moving average around $190 is likely. This technical setup, combined with reduced whale activity, points to increased risk of a correction.

Thesis and Supporting Arguments

The thesis is that AAVE’s price is poised for a pullback due to technical and on-chain factors. Supporting arguments include:

• The formation of a double-top pattern on weekly charts, a bearish reversal indicator.
• Declining whale and smart money accumulation, reflecting reduced confidence at current levels.
• Rising exchange supply, indicating profit-taking and potential selling pressure.

This analysis is based on available data and should not be considered financial advice. Investors should conduct their own research before making decisions.