AAVE Poised for 30.72% Rally as Liquidity and Market Sentiment Improve

AAVE, a decentralized finance (DeFi) protocol, is poised for a significant rally, with analysts predicting a potential 30% increase in its value. However, the asset faces two major obstacles that could impede its progress. Despite these challenges, growing liquidity into the Aave protocol has contributed to recent growth, and the asset could benefit further once it overcomes these barriers.

AAVE is currently at a critical juncture as it attempts to breach a descending line pattern on its 4-hour chart. This pattern is typically bullish, but AAVE must first overcome this initial obstacle before rallying at least 30.72% to the next major barrier, a supply region marked on the chart. This level is significant as it induced the current AAVE decline that began on the 5th of March. If AAVE takes a bullish path, it could see further declines from the supply level or consolidate within the region. However, if market momentum remains high and AAVE exits this supply region, it could make another leg up, rallying 42%.

Liquidity flow into the Aave ecosystem is expected to play a key role in achieving this rally. The market capitalization-to-total value locked (TVL) ratio, a metric used to assess the ecosystem’s value relative to its price growth, stood at 0.15 at press time, suggesting ecosystem growth. This implies that it may only be a matter of time before AAVE rallies. Additionally, selling pressure has declined among traders who were previously highly bearish, with selling dropping to $110,000 worth of AAVE—a notable decline. Such a shift implies that sellers are reducing, and buying could soon begin. Buyers taking charge of the market would play an important role in AAVE achieving its 30.72% rally.

Even in the derivatives market, traders are betting on an AAVE price rally. The OI-Weighted Funding Rate, which combines funding and Open Interest to determine market sentiment, has turned positive at 0.0087%. A positive reading implies that buyers in the market are taking over, as more unsettled contracts are dominated by longs, who are paying a premium fee periodically to maintain their positions. Derivatives market volume is also skewed in favor of bulls, as the Taker Buy-Sell Ratio has turned 1.0056. Whenever this ratio crosses above 1, it indicates more buying than selling within the past 24 hours. If these key metrics continue to turn positive, then AAVE could see a major price rally moving into the week.