Aave is a decentralized finance (DeFi) protocol built on the Ethereum blockchain. It allows users to lend and borrow cryptocurrencies through smart contracts. Aave’s native token is called AAVE.
Historically, Aave has been one of the leading protocols in the DeFi space, offering innovative features such as flash loans and a wide range of supported assets. Aave has gained popularity due to its user-friendly interface, strong security measures, and active development community.
Enter market analysis.
Aave has been in a solid downward trend since the price hit an all-time high at $670 (pointed out by the blue arrow) in May 2021. The bears seem to have been in full control and have successfully brought the price down thrice to an area that is just above the lowest low (pointed out by the red arrow) as shown below.
A major support level was created at $49.20 after the price was brought down to that area twice (pointed out by the white arrows). Price is currently at that same level for a third time.
Aave doesn’t have much history for us to compare similarities of behaviors in its past. However, its 1-week chart displays a good example of a descending triangle pattern. A descending triangle is a bearish pattern. It’s the combination of a downward trendline (also acting as resistance), an M chart pattern, and a horizontal line (which acts as a support level) connecting a series of lows. Even a standalone M pattern is usually regarded as a bearish pattern.
After the first points of contact at the horizontal support at $49.20 and trendline resistance at $108.22, the price retested the support level, making a low equal to the previous one. Price then made a lower high at $93.04, meaning even after the price reacted to the support level, the bulls didn’t have enough control to make a higher high or even an equal high, indicating that the bears were still in higher control.
Now that the current price has arrived at the support level again, the pattern is now complete, and from the looks of it, the price might break the support level and want to approach and retest the all-time low or possibly breach it.
It was decided that in order to watch out for a breakout at the support level and possible entries, we must take a narrower look by exploring the daily time frame. Price had initially gone beyond the support level but was later pushed back up by a little, causing the candle to close above the support level (long wick candle, pointed out by white arrow) and causing a tiny pullback but the price has come back down to retest the support level again. We must wait for a candle to close below the support level to show a good confirmation of trend continuation.
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Dominic Jubemi is primarily into legal practice. However, he has taken interest in building and grooming fundamental skills in FX and Crypto trading, audio engineering and in the nearest future, fiction writing.