AAVE price remained under pressure this week as the recent demand in the crypto industry waned following Donald Trump’s inauguration. The AAVE token dropped for two consecutive days, reaching a low of $336, down by 16% below its highest level this year. This decline has brought its market cap to $5 billion.
AAVE price is slowly forming a bullish pattern
The weekly chart shows that the AAVE token price peaked at near $400 earlier this month and then dropped to $340.
AAVE price has moved above the 50-week and 25-week Exponential Moving Averages (EMA), a highly bullish sign.
Most importantly, the coin is slowly forming a bullish pennant chart pattern comprising a vertical line and a symmetrical triangle. The pennant is similar to the bullish flag, with the only difference being the shape of the consolidation phase.
AAVE has moved above the crucial resistance level at $154, its highest swing on March 11 last year.
Therefore, the most likely scenario is bullish, with the next target point being at $400, the upper side of the pennant, which is about 20% above the current level. A break above that level will likely point to more gains, with the next important level to watch being at $670, up by 100% from the current level.
This view will be invalidated if the AAVE price crashes below the key support at $256, its lowest swing on January 13.
Potential catalysts for the AAVE token
There are several potential catalysts for the AAVE price. First, AAVE has evolved into the second-biggest player in the DeFi ecosystem after Lido DAO, the top liquid staking platform.
AAVE has brought in over $21 billion in total value locked (TVL). Most of the volume is in its Ethereum chain, which has over $18.2 billion in assets. It is followed by Arbitrum, which has over $1.07 billion. The other big players in the AAVE network are Avalanche, Base, Polygon, and Optimism.
Second, AAVE is one of the most profitable network in the crypto industry. According to TokenTerminal, the network has made over $508 million in the last 365 days. This makes it the fourth most profitable player in the DeFi industry after Uniswap, Lido Finance, and Jito.
Third, the upcoming V4 upgrade may benefit the AAVE price. The V4 proposal is the next big thing in the AAVE network, building on the success of V3. It will introduce new features like modularity, reduced governance overhead, and integrations with GHO, the AAVE-native stablecoin.
AAVE V4 will also have a unified liquidity layer, which will manage the supply and borrow caps, interest rates, assets, and incentives. The V4 will be launched later this year, and could act as the catalyst for the token.
Further, there are signs that more investors are upbeat about AAVE as the number of addresses has grown. Its new addresses have jumped by 36% in the last seven days, while active addresses are up by 18% in the same period.
Additionally, World Liberty Financial, the large DeFi project by Donald Trump, has selected AAVE as its technology provider. It has also invested in AAVE by buying about 20k tokens worth over $6.6 million. That is a sign that the network and its coin are gaining traction among investors.
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