Analyzing Aave’s Recent 13% Decline Amid Ongoing Governance Disputes

Aave has recently experienced a significant drop of 13.34% over the past week, mainly due to ongoing disputes in the governance of the DeFi protocol. The sliding token prices reflect the continued tension between Aave Labs and the DAO regarding fee revenue distribution. While a minor rebound may be on the horizon, a full recovery doesn't appear imminent.

Key Takeaways

Aave has declined by 13.34% recently amidst governance issues.
The price analysis shows a persistent bearish trend on both three-day and four-hour charts.
Traders should wait for potential price recoveries near key resistance levels for short-selling opportunities.
The overall market dynamics and Bitcoin's performance could influence Aave's future price direction.

AAVE under pressure as internal conflict and market-wide fear combine

Understanding the Longer-Term Price Movement

Aave 3-day Chart Source: AAVE/USDT on TradingView

The three-day chart indicates a continuous downtrend for Aave [AAVE] in recent months. The previous lows around $220 could not withstand the October sell-off and were later tested as resistance in early November. As it stands, the bearish structure is still dominating this timeframe. A notable area of concern for potential price control by bears exists around the $160 resistance zone. For the altcoin prices to shift the D3 structure to bullish, they must surpass the local high of $207.1.

Aave 4-hour Chart Source: AAVE/USDT on TradingView

The four-hour chart reinforces the bearish outlook. Despite AAVE bouncing back from a local low of $146.4 to reach around $155, the overall swing structure remains bearish. However, the MACD is trending towards zero, indicating a decrease in bearish momentum. Additionally, the CMF has climbed past +0.05, showing noticeable buying pressure in the market, which could lead to a bounce towards the key resistance levels. The Fibonacci retracement levels at $171.85 and $187.58 coincide with the $166-$175 imbalance on this timeframe.

What Will Aave's Next Move Be?

An uptick in demand, along with a potential recovery of Bitcoin [BTC] back above $90k and $94.5k, could temporarily uplift the altcoin markets. In such a situation, there might be a price bounce beyond $187, signaling a reversal of the current downtrend. However, this scenario appears unlikely at the moment.

Trading Recommendations: Wait for a Bounce to Short

The ongoing internal strife within the protocol seems to be undermining confidence in the token. Despite being a leader in the DeFi space, there are signs that Aave's fundamental strengths remain intact despite its current price volatility.

Given the long-term price trends and uncertainty surrounding Aave, traders might consider utilizing any incoming price bounces at key resistance levels to sell the token. The area between $167 and $178 could present good short-selling opportunities. Conversely, if Aave surpasses $187, it would negate this strategy and indicate a potential trend reversal.

Final Thoughts

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not represent financial, investment, or trading advice.