AAVE Price Prediction: $1 Billion in High-Risk Loans Spread Correction Fear

AAVE Price Prediction: The cryptocurrency market witnessed a renewed supply pressure this week as the Bitcoin price plunged below the $70000 mark. The overhead supply hints at an extended consolidation for several top assets, including AAVE as it loses the $100 psychological level. Moreover, the volume of high-risk loans on the Aave Protocol reaching new heights creates a liquidation risk for buyers if the broader market takes another dip.

Also Read: “Inflation Is A Hidden Tax on Your Money” Bitcoin Exchange Knocks Fiat in New Ad

High-Risk Loans on Aave Soar to $1 Billion Amid DeFi Market Surge

The near-term trend in the AAVE coin is bearish displayed by the lower-high formation in the daily chart. These swing highs connected by a downsloping trendline create a key resistance that bolsters the sentiment of selling the bounces among traders.

Moreover, the Bitcoin price has wavered in low volatility for the past two weeks resulting in a sideway action for several altcoins. However, the AAVE took a major toll in this consolidation as it plunged 18.5% from $114.7 to $91.5, while the market cap fell to $1.39 Billion.

As the decentralized finance (DeFi) sector experiences unprecedented growth, concerns are mounting over the swelling volume of high-risk loans. According to a recent analysis by IntoTheBlock, a leading crypto analytics firm, the total volume of high-risk loans on the DeFi lending platform Aave has alarmingly reached $1 billion.

As DeFi loans hit multi-year highs, the volume of high-risk loans is also surging.

On Aave, the total volume of high-risk loans has reached $1 billion. These loans are secured against volatile collateral and are within 5% of the liquidation threshold, posing significant risks. pic.twitter.com/sLBtm6yerW

— IntoTheBlock (@intotheblock) June 8, 2024

The data provided by IntoTheBlock highlights a sharp increase in these risky assets, which are secured against volatile collateral and are now perilously close to the liquidation threshold. This situation poses significant risks, as the loans are only within 5% of triggering liquidation events that could impact the broader market.

If the correction trend continues, the AAVE price could witness heavy liquidation bolster a downfall to $80. The falling could also trigger a panic selling among traders and may plunge the asset to $61.

Also Read: Bitcoin Price: Hedge Funds Heavily Shorting BTC, Will It Outshine GameStop Saga?

AAVE Price Prediction Hints Rally to $250 As Triangle Pattern Emerges

An analysis of the weekly chart shows the long-term trend in AAVE price is sideways resonating within two converging trend lines. The lateral movement hints at the formation of a symmetrical triangle pattern— a chart leading consolidation trend is built of momentum for direction. 

Thus, for buyers to regain control over this asset, a breakout above the pattern’s overhead trendline is needed. The potential breakout will signal a major trend reversal and bolster a rally to surpass the $250 mark.

Technical Indicator:

• Exponential Moving Average: The AAVE price breakdown below the 200-day EMA signals the sellers strengthening their grip over this asset.
• Relative Strength Index: The daily RSI slope falling to 42% accentuates a bearish sentiment among market participants.

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Sahil Mahadik

Sahil is a dedicated full-time trader with over three years of experience in the financial markets. Armed with a strong grasp of technical analysis, he keeps a vigilant eye on the daily price movements of top assets and indices. Drawn by his fascination with financial instruments, Sahil enthusiastically embraced the emerging realm of cryptocurrency, where he continues to explore opportunities driven by his passion for trading

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