Why could AAVE increase by 20%?

• Aave price is retesting the support area between $117.53 and $112.48 with a reversal coming.
• Chain data paints a bullish picture as AAVE’s long-short ratio is above one and the NPL metric is negative.
• A daily candle close below $112.48 would invalidate the bullish thesis.

Aave (AAVE) price is retesting its major support level and is up 5.5% at the time of writing on Wednesday. On-chain data supports the bullish thesis and points to a rally ahead, as shown by AAVE’s long-short ratio of over one and the net realized profit/loss (NPL) indicator showing negative growth.

The price of AAVE looks promising

Aave price is retesting its support zone between $117.53 and $112.48. This area could serve as a major support area, roughly coinciding with three key levels.

1. The daily support level is $117.53.
2. The 50-day exponential moving average (EMA) is around $113.75.
3. Price retracement of 50% from an early August low to a late August high of $112.48.

At the time of writing on Wednesday, AAVE is retesting the support area and rebounding 5.5% higher to trade at $123.17.

If this support area holds, AAVE could rise 20% to hold its daily resistance at $142.69.

The Relative Strength Index (RSI) on the daily chart is reversing its neutral level of 50 and the Awesome Oscillator (AO) is still trading above its neutral level of zero. If the bulls do come back, then both momentum indicators need to hold their positions above their respective neutral levels. Such a development would add a tailwind to the recovery rally.

AAVE/USDT Daily Chart

Coinglass’ AAVE long-short ratio is also 1.04, supporting the bullish outlook. This report reflects bullish sentiment in the market as the number above suggests that more traders are anticipating the asset’s price to rise.

Long-short AAVE ratio graph

On-chain data provider Santiment’s Network Realized Profit/Loss (NPL) indicator measures a network-wide daily return on investment (ROI) based on the coin’s on-chain transaction volume. It is generally used to measure market pain. Strong increases in a token’s NPL indicate that its holders are, on average, selling their baggage at a significant profit. On the other hand, sharp declines imply that coin holders are making losses on average, suggesting panic selling and investor capitulation.

The NPL gauge fell from 853,290 to -1.67 million Tuesday through Wednesday in the case of AAVE. This negative downtick indicates that holders were, on average, making losses.

However, during the same period, AAVE’s offering on exchanges fell by 2%. This drop in supply on exchanges indicates that investors are moving AAVE tokens into wallets and reducing selling activity, signaling an optimistic outlook and further denoting investor confidence in AAVE.

Profit/loss and supply made by AAVE network on the exchange chart

Despite the bullish thesis signaled by both chain data and technical analysis, the outlook will change to the downside if AAVE’s daily candle closes below the lower band of the support zone at 112.48. This scenario could lead to a 4% decline to retest the August 19 low of $107.55.