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- The AAVE formed a bearish divergence, possibly signaling a temporary recession after its impressive rally.
- On-chain data indicated a shift in the dynamics of exchange flows, in a nod to the bears.
Aaf [AAVE] was one of the few cryptocurrencies that managed to dodge bearish market conditions in recent weeks. However, what goes up must come down, and AAVE’s rally may be over, at least for now.
AAVE has been bearish for the second half of this week. It extended its downward momentum over the past 24 hours to reach the second biggest loser to the top coins of the past 24 hours.
It fell by more than 6% during the trading session.
The bearish outcome was not surprising for AAVE as a major bearish sign recently appeared. The cryptocurrency reached a higher high this month compared to August’s peak.
Meanwhile, the RSI reached a lower high compared to the August high, creating a bearish divergence.
Source: TradingView
The difference indicated that bullish momentum was drying up. Since then, it has paved the way for an 11.95% correction at the 147.20 price level at a time.
This could be the start of a significant correction given the gains from the August low.
Will AAVE Bears Drop?
AAVE was trading at an 85% premium to its August low despite the recent pullback. The next major support zone to watch for is just below $120 if the bears continue to move lower.
That would equate to another 16% pullback from press-time levels.
However, keep in mind that a shift in market dynamics in favor of a bullish outcome could give the bulls momentum.
On-chain data indicated a turnaround in foreign exchange inflows, confirming the build-up of selling pressure. Total currency flows increased from 15,340 AAVE on September 7 to 112,780 AAVE on September 12.
Source: IntoTheBlock
Outflow volumes on the exchange peaked from 182,040 AAVE on September 4 to 85200 AAVE on October 12.
This confirmed a drop in demand previously responsible for the DeFi token’s last explosive outburst.
AMBCrypto also saw notable activity in the derivatives segment. There was an increase in the number of short positions in the $149 price range.
2.19 million short positions were recorded within that price range, coinciding with significant resistance.
Source: IntoTheBlock
Read Aave’s [AAVE] Price forecast 2024–2025
Heatmaps also revealed a whopping 2.90 million net longs at the $151 price level on September 12.
This suggested that there may have been a significant number of liquidations after the price started to fall, which may have contributed to the selling pressure.