Is AAVE Price Overbought After 50% Rally? MVRV Ratio Offers Key Insights

AAVE price showed an insignificant growth of 0.1% during the U.S. market session on Friday. While the intraday trades are neutral, the short-term holders have acquired significant profit as AAVE coin bounced from $90 to $136— a 50% increase within two weeks. Will this recovery continue, or are buyers exhausted to drive further rally?

AAVE Price Hits Five-Month High Amid Aavenomics Update

In the last two weeks, the AAVE price recorded a notable recovery, reaching a five-month high of $143.7 on Wednesday. The bullish momentum trend followed the recent proposal of “Aavenomics” update, which aims to transform AAVE’s economic model by focusing on reducing risks and enhancing rewards for stakers.

Instead of depending on inflationary yields, AAVE plans to utilize revenue generated by the protocol, marking a shift towards a more sustainable and potentially less volatile system. Despite an aggressive rally, a whale recently accumulated 15,747 AAVE( worth around $2.12M) from Binance accounting to Lookonchain.

Smart money accumulation typically signals a bullish outlook for the cryptocurrency, but this whale recorded losses in two trades with LDO and Pendle.

A whale withdrew 15,747 $AAVE($2.12M) from #Binance 1 hour ago.

This whale also traded $LDO and $PENDLE before but lost money on both.

He lost $1.54M(-54%) on $LDO and $640K(-39%) on $PENDLE.https://t.co/SxZuPS1gw0 pic.twitter.com/FL9Ob139eh

— Lookonchain (@lookonchain) August 23, 2024

If the AAVE price managed to sustain above the $132.5 level, the buyers could prolong this recovery by 13% before a major breakout rally at $153, followed by a push to $200.

The Average Directional Index at 26% accentuates the buyers have sufficient momentum to lead the further rally.

AAVE Coin Eyes Minor Pullback Before Next Leap

In the daily chart, the AAVE price is far from the fast-moving 20 and 50 Exponential moving averages (EMAs). Typically, this indicates an overextended rally, which leads to a short pullback for buyers to regain strength.

Data from Santiment analytics shows the 30-day MVRV (Market Value to Realised Value) climbed significantly from negative territory in early July 2024 to positive levels above 20% as of late August 2024. This indicates the short-term holders have acquired significant growth, which increases the likelihood of profit-taking.

A deeper analysis of the chart below shows that the MVRV ratio picked above 20% the last two times, and the AAVE price witnessed a notable correction of 35% in early August and 20% in mid-July.

Thus, the anticipated pullback could plunge the asset around 14% to retest the combined support of $117.5 and 20-day EMA.