AAVE Price Prediction – What Could Be the Next Milestone?

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Aave (AAVE) is a decentralized lending and borrowing protocol built on the Ethereum blockchain. It allows users to lend and borrow various cryptocurrencies through smart contracts.

Technically, Aave operates on a peer-to-contract model, meaning that users interact directly with smart contracts rather than intermediaries.

Aave utilizes a unique feature called “flash loans,” which enables users to borrow assets without requiring collateral as long as the loan is repaid within the same transaction.

This functionality is possible by smart contracts, which allow multiple actions to be executed atomically.

The protocol’s native token, AAVE, serves multiple purposes within the Aave ecosystem. It is used for governance, allowing holders to propose and vote on protocol upgrades and decisions.

AAVE is also used as collateral for borrowing and lending operations, enabling users to access additional funds while maintaining the required collateralization ratio.

Aave’s Past and Present Price Action in the Short Term

Since the token joins the crypto market, it has tasted its share of its volatility. It has also seen persistent losses, fluctuations, rallies, and even price consolidations.

Irrespective of its price action since the start of 2023, Aave’s price trend in the short term indicates the rekindling strength of the bulls in the market.

Throughout June, it traded between the $50 and $68 levels. On July 1, the price touched $70.43 and declined to $68.14 the next day (July 2).

However, today July 4, 2023, Aave is trading at $78.20, indicating a 12.03% increase at the time of writing. Some analysts suggest that the coin could be rebuilding its path to the bullish market, projecting more price gains in the long run.

Notwithstanding, the price outlook below could hint at Aave’s next price move considering the sentiments on several indicators.

Aave’s Price Outlook Based on Technical Indicators

The bulls favor Aave’s price, as depicted in the chart above. Aave’s Moving Average Convergence/Divergence (MACD) is above the signal line, confirming the coin’s bullish trend. Also, considering the bold green bar on the histogram, the possibility of AAVE touching the $80 level during its trade today is high.

Furthermore, the Relative Strength Index (RSI) is at 69.07, a neutral market position. It’s inclining towards the overbought region (above 70), suggesting a potentially overvalued market for Aava.

This sentiment could support the MACD, causing the coin to reach the $80 level quickly.

Moreover, Aave is trading above its 50-Day and 200-Day Simple Moving Averages (SMA), a short and long-term bullish market sentiment. As such, the coin is prone to see more price growth in the coming days to weeks.

Meanwhile, considering the price weakness depicted on the inverted SMA indicator, Aave could also experience price stagnation, trading at the $77 level for a longer period.

Aave’s Support and Resistance Levels

Aave’s support levels are $56.52 and $82.53, and the resistance levels are $123.12 and $137.20. However, the current price is at $77.76.

The coin’s price is closer to the lower support level of $56.52. It suggests that there may be some buying pressure or support around this price range. If the price remains above this level, it could indicate a potential bounce or reversal from the support area.

On the other hand, the price is below both resistance levels of $123.12 and $137.20. This indicates that selling pressure or barriers may prevent the price from rising further.

Moreover, given the wide range between support and resistance levels, the price may experience increased volatility and price swings. Traders could take advantage of these price movements to buy near support and sell near resistance, potentially generating profits from short-term fluctuations.

However, if the price surpasses the resistance levels at $123.12 and $137.20, it could indicate a breakout to the upside. This could attract more buyers, potentially pushing the price higher and signaling a new bullish trend.

Note that crypto markets are highly volatile and influenced by various factors like market sentiment, investor behavior, news events, etc. Therefore, price movements can deviate from expected levels, and careful analysis and monitoring of market conditions are crucial for making informed trading decisions.

Experts’ Short and Long-Term Price Predictions

Irrespective of Aave’s price outlook on Tradingview, many experts have predicted the coin’s price in the short and long term based on fundamental and technical indicators. Here are experts’ price predictions for AAVE from 2023 and beyond.

According to CryptoNewsZ, Aave is expected to potentially hit a maximum of $87.75, an average of $78.85, and a minimum of $76.36 by the end of 2023.

The coin is expected to perform well throughout 2024. Therefore, by 2025, it should reach a maximum of $320 with an average of $210. However, if there is a decline, AAVE could reach a minimum of $129 in 2025.

CryptoNewsZ predicts that Aave’s maximum, minimum, and average prices in the next 5 years (2026 to 2030) will spike significantly, recording $650, $500, and $575 by the end of 2023.

In line with CryptoNewsZ’s bullish predictions, another crypto analyst, BitNation, predicts the minimum, maximum, and average prices for Aave by the end of 2023 to be around $93.72, $140.58, and $117.15, respectively.

Also, by 2025, the coin should record $249.42 (minimum), $273.35 (average), and $296.78 (maximum). In the next 5 years, BitNation predicts Aave to reach $687.28 (maximum), $663.85 (average), and $640.42 (minimum).

Factors Affecting the Price of Aave

Macroeconomic activities, regulatory crackdowns, investors and market sentiment, platform solutions, and token utility are a few factors that affect the price of a cryptocurrency.

Also, news and developments in the crypto ecosystem can impact a coin’s price, either negatively or positively. As such, here are some notable factors that could be affecting the price of Aave.

The Suspension of TUSD Reserves

True USD (TUSD) experienced recent volatility, prompting the Aave (AAVE) governance to take action to mitigate risk. They proposed a pause on the TUSD reserve within the Aave V2 Ethereum pool, temporarily halting funding and borrowing of True USD.

Existing TUSD holdings will not be affected, allowing users to continue paying back and withdrawing TUSD from the pool. This cautious approach aims to reduce risks and unforeseen outcomes associated with TUSD. As a result, it could positively impact the protocol’s state over time.

The proposed plan has already received approval from 83.76% of Aave users, indicating community support for the strategy. On the other hand, the data from Token Terminal shows that Aave’s daily active user count declined by 10.7% in the previous week, which subsequently affected revenue, leading to a 12.3% decrease.

Despite the decline in user activity and revenue, the price of the AAVE token has significantly increased over the past month. It rose by 52.98% from $47.51 on June 10 and was priced at $72.68 at press time.

It has increased by 11.39% to $77.99 at the time of writing. AAVE’s Market Value to Realized Value (MVRV) ratio has increased along with the price rise, indicating successful token holdings by most addresses at the time of publication.

However, there is a possibility of a price decrease if these holders decide to liquidate their holdings for profit, given their significant earning capacity.

The Long/Short difference has decreased in the past weeks, indicating that many of these addresses held the AAVE token for a short period. This suggests that these investors might be more inclined to liquidate their shares in the future, potentially impacting AAVE’s growth.

The Overcollateralization Security System

Aave implements an Over-collateralization (OC) security system to protect lenders and users on its protocol. Overcollateralization is a risk management mechanism where borrowers must deposit more collateral than the value of their borrowing assets.

In Aave’s case, borrowers deposit digital assets as collateral, which are held in smart contracts. The value of the collateral is evaluated based on its market price and a specific Loan-to-Value (LTV) ratio. The LTV ratio determines how much borrowing power a user has based on the value of their collateral.

For example, if the LTV ratio is set at 75%, a borrower can borrow up to 75% of the value of their deposited collateral. If they deposit $100 worth of collateral, they can borrow up to $75.

The over-collateralization requirement provides a safety net for lenders because, in the event of default or price volatility, the protocol can liquidate the borrower’s collateral to repay the outstanding loan. By requiring borrowers to overcollateralize their loans, Aave reduces the risk of loss for lenders and helps maintain the stability and integrity of the protocol.

In addition to protecting lenders, the over-collateralization system also benefits borrowers. Borrowers can access liquidity without selling their holdings by utilizing their existing digital assets as collateral. This allows them to maintain exposure to their assets’ potential future price appreciation.

It’s important to note that the specific LTV ratios and collateral requirements may vary depending on the asset and market conditions. Aave’s governance, which includes token holders, can propose and vote on changes to these parameters to ensure the system remains balanced and adaptable to market dynamics.

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