Disclaimer: The information provided does not constitute financial, investment, trading or other types of advice and is the opinion of the author only
- A dip below $79 makes the market structure bearish
- Some outflows from the stock markets indicate a moderate possibility of a bullish scenario
Since the 5th of November, the dominance of USDT (tether) has increased from 6.81% to 8.38%. This showed market participants fleeing from crypto assets to owning stablecoins like Tether. Fear gripped the markets in the wake of the FTX bankruptcy news. Aave has been doing really well in the last month.
Read Aaves [AAVE] Price forecast 2023-2023
It rose almost 45% from $67.2 to $98.4, but regained almost all of those gains within a week. In other news, the partnership Between Aave and Balancer it could give token holders a chance to put their tokens into action instead of just holding on to them.
Important support levels have been breached and traders may continue to the downside
On the 12-hour chart, Aave formed a bullish order block near $72 on October 13. AAVE fell again in this order block giving higher time frame traders an opportunity to enter long positions.
With that said, the market structure was bearish on the 12 hour and daily time frames. The support levels at $79 and $72 were breached. Therefore, even if the negation of the bullish notion is relatively soon, traders may want to exercise caution.
Bitcoin’s drop below the $18.6K-$18.2K region has thrown bulls’ hopes through the window. A deeper correction was certainly possible, and risk-averse traders looking to trade the trend can wait for a better risk-reward entry into a short position.
The Relative Strength Index (RSI) fell below the neutral 50, showing strong bearish momentum. Volume on Libra (OBV) has also fallen below the support level from late September, which extended all the way through to mid-July.
Whether Aave sees further losses below $68, or if a major rebound is possible in the next few days remains to be seen. However, it was clear that AAVE presented an opportunity to enter a long position with clear voiding in the near term. The close of the daily session below $64.7 might be a signal to close out the long positions, and the next support level for AAVE was at $56.
Exchange Flow Shows Tokens Exiting Major Exchanges
Funding rate for Aave on Binance has been mostly positive in recent weeks. AAVE recorded a high of $98.4, and since then the funding rate has fallen into negative territory. The surprising discovery from on-chain metrics was the fact that recent days have not seen any high inflows from known exchange wallets. This would have indicated that strong selling pressure was imminent.
On the contrary, the past two days have already seen an influx of tokens from exchanges. This indicates that there is an opportunity for whales to accumulate tokens despite the massive dumping.
If so, Aave could soon reverse its bearish momentum. However, it may be unwise to trade against the broader market trend. Alternatively, a cautious trader can wait for reversal signals before buying the asset.