AAVE holders lost 12% in February. Nevertheless, several on-chain metrics point to an extended price slump.
Will Selling Pressure Increase As Bearish Crypto Investors Are Moving Tokens To Exchanges?
DeFi Investors Are Unstaking
Holders of AAVE, the native token of the open-source lending protocol, have faced a 12% drop in price over the past 30 days. Nevertheless, on-chain indicators suggest that the market may remain bearish for the foreseeable future.
According to Glassnode, a leading on-chain data and intelligence provider, the amount of AAVE deposited in smart contracts has been on the decline for two consecutive months.
The percentage of AAVE tokens locked in DeFi smart contracts has made a series of new lows in a row since the beginning of February.
Since February 28, the amount of AAVE tokens locked in various DeFi protocols has decreased by approximately 60,000 AAVE (0.42% of the total circulating supply) as of March 15.
When DeFi investors unlock tokens from smart contracts, it increases the units of tokens available to be traded on exchanges. And the influx of newly-unlocked tokens could drive prices down in the short term.
In a similarly bearish outlook, inflows of AAVE tokens on exchanges have consistently outpaced outflows in the first half of March. The exchange netflow metric tracks the surplus inflow of tokens into exchanges when daily outflows are subtracted.
The netflow of AAVE token on recognized exchange wallets has been positive for more than 14 consecutive days since the close of February.
According to Glassnode, exchange inflows exceed outflows by at least 16,000 AAVE tokens per day for the first half of March 2023. An extended period of positive exchange netflow usually reflects an oversupplied market. This could mean that holders are increasingly preparing themselves for short-term trading opportunities.
Ultimately, if AAVE holders continue to delist the token from smart contracts at the current rate and exchange netflows remain positive, crypto investors can expect an extended price slump in the coming weeks.
Average Price Prediction: Odds Favor Bears
Global in/out-of-the-money data from IntoTheBlock provides an insight into potential AAVE bullish price performance. The GIOM metric tracks the value distribution of token holders based on the amount of tokens held at each address.
Only 33% of AAVE holders are “in the money” or “in profit” around current prices. Nevertheless, AAVE is currently showing signs of impending selling pressure.
According to the current on-chain indicators, AAVE is likely to decline towards $68. This is where the 16,000 addresses holding 3 million tokens can provide some assistance. If it fails to hold this support, AAV is likely to decline towards $55. The average purchase price for another group of 20,000 holders with 2 million tokens.
However, if AAVE makes an unexpected rally, it could test $85 initially. The maximum price that 13,000 addresses bought was 6.4 million tokens. If there is an upside break above $85, the AAV could move higher towards the next important group of resistance near the $110 level. Here is where 28,000 addresses are looking to take some profits on their 2.3 million AAVE holdings.
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