Aave Technical Analysis: LEND imminent reversal as bears regain control

  • Aave struggles under intensifying bearish grip following rejection at the 50 SMA.
  • On-chain analysis reveals the lack of formidable support, hence the possibility of further breakdown.

Aave's downtrend has been unstoppable since the August high of $0.9. Declines also followed the confines of a descending parallel channel. The downside support at $0.4 helped slow down the bearish momentum, culminating in gains above the channel's middle boundary. While the hurdle at $0.5 has been brought down, LEND is yet to correct the adverse price action, for gains past $1.

At the time of writing, the decentralized finance (DeFi) token is trading at $0.51. Generally, the dominant momentum is bearish, hence the need to hunt for a robust support area. It has become apparent that upward price action will not happen without challenges. Meanwhile, holding above $0.5 remains the bulls' priority as it could save them from a trip downstream.

Aave plans to bring DeFi to institutional investors

Aave announced on Monday that it had raised at least $25 million from strategic investors including, Standard Crypto, Blockchain.com, and Blockchain capital. Aave plans to use the funds to bring DeFi closer to institutional investors. The platform accepts deposits from users to provide liquidity. The liquidity providers earn interest on their deposits while other users take collateralized loans. This new funding will work as a supplement to the $24 million raised in a series of token sales since Aave's launch in 2017.

Aave's recovery hits a wall at $0.5

Aave's recent recovery from support at $0.4 hit a snag at the 50 Simple Moving Average in the 12-hour timeframe. The supply at this zone is intensifying the bearish pressure on LEND. Upward price action is unlikely to resume in the near term based on the horizontally moving Relative Strength Index (RSI). It is also essential to watch the RSI because a drop under the midline will shine a light on increasing sell orders.

LEND/USD 2-hour chart

LEND/USD price chart

Short term support is envisaged at the 200 SMA in the same 12-hour range. However, if broken, LEND might drop further and retest the anchor at $0.4. Simultaneously, extended losses will seek refuge at the descending parallel channel support, $0.35 and $0.25 levels, respectively.

IntoTheBlock's IOMAP model reveals intense resistance above the current Aave price. It is doubtful that buyers will penetrate the seller congestion to continue with the uptrend towards $0.6. The most robust resistance zone is illustrated between $0.52 and $0.53. Here, 374 addresses bought roughly 546 million LEND.

Aave IOMAP chart

Aave IOMAP chart

On the downside, the lack of vital support areas means that the path with the least hurdles is downwards. However, buyers will try holding onto the initial demand zone at $0.49 - $0.50. Previously, 828 addresses purchased approximately 27.6 million LEND.

Subsequently, the "Daily New Addresses" metric brings to light a progressive decline in the number of new addresses joining the network. Since October 3 peak at 516, new addresses joining Aave have reduced significantly to 125. The downward trend in network growth is a red flag for LEND price in the near future. A sustained drop in network progression indicates eventual deterioration of the token value.

 Aave New Addresses chart

LEND new addresses

Looking at the other side of the fence

It is worth mentioning that the buyers are not entirely sabotaged. If they can pull the price above the 50 SMA, then Aave will resume the uptrend. The action above the descending parallel channel and the 100 SMA could open the door for gains eyeing $0.6 and $0.9, respectively.

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