Why is AAVE crashing?

Aave price hovers around $343 on Thursday after correcting more than 6% this week.
The recent decline has led to $5.13 million in total liquidations, 84% from long positions.
AAVE NPL metric shows a massive spike, suggesting that holders are realizing profits and increasing the selling pressure.

Aave (AAVE) price hovers around $343 on Thursday after correcting more than 6% this week. The recent downturn has led to $5.13 million in total liquidations, 84% of which were from long positions. Aave’s Network Realized Profit/Loss (NPL) indicator shows a massive spike, suggesting that holders realize profits and increase selling pressure, hinting at a double-digit correction ahead.

Aave bulls show signs of exhaustion

Aave price faced a correction on Tuesday after reaching the $400 level on Monday following a rally of more than 30% the previous week. At the time of writing on Thursday, it hovers around $343.

If AAVE continues its pullback, it could extend the decline by 17% to retest its next support level at $284.63.

The Relative Strength Index (RSI) on the weekly chart reads 74, above its overbought level of 70 and points downwards, indicating weakness in bullish momentum. If the RSI slips below the overbought level, it could indicate a downward trend ahead.

AAVE/USDT weekly chart

Aave’s recent decline on Wednesday triggered a wave of liquidations totaling over $5.13 million, with 84% coming from long positions, according to data from CoinGlass.

Liquidations like this could spark Fear, Uncertainty, and Doubt (FUD) among AAVE investors, raising selling pressure and leading to a further decline in its price.

AAVE Liquidation chart. Source: Coinglass

AAVE’s Network Realized Profit/Loss (NPL) indicator from on-chain data provider Santiment adds further credence to the bearish outlook. The NPL metric shows a massive spike on Tuesday, rising from 24.29 million to 292.44 million, almost 12 times in one day. Strong spikes in a coin’s NPL indicate that its holders are, on average, selling their bags at a significant profit and increasing the selling pressure. A similar move could be seen on February 24, 2021, where the metric spiked almost 20 times in one day, leading to a 25% decline in AAVE’s price in the next five days.

AAVE NPL chart. Source: Santiment

Share: Cryptos feed

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.