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- 1 AAVE accepts many assets from users, these include stable coins, altcoins and tokens.
- 2 The AAVE token falls below its 50-Day EMA, see the prediction below.
Aave is a DeFi platform for borrowing and lending cryptocurrencies. It uses a liquidity pool to provide loans to users. Currently, the AAVE token is trading on an uptrend after the October month of last year.
Aave and Its Working
Aave’s pool of crypto enables the code to pull out funds for loans at scale and on demand. The automation of transactions through smart contracts ensures quick lending and borrowing, but it also means that failure to pay back the loan on time could result in the liquidation of assets without any room for negotiation or extension.
Aave accepts dozens of assets from users, including stablecoins like USDT or USDC, and tokens such as BAT and MANA, with varying annual rates of return depending on the asset, blockchain, supply and demand, and the version of Aave being used.
Currently, there are three versions of the protocol: Aave v1, v2, and v3, each with network upgrades.
According to DeFi Llama, Aave v2 is currently the largest public lending market with $5.29 Billion in TVL. Aave v3 has $1.47 Billion in TVL. Aave Arc, a permissioned DeFi lending protocol used by financial institutions such as Binance and Coinbase, is the largest market for Aave.
Aave is known for popularizing “flash loans,” which are immediate crypto loans that require no collateral, provided they can be repaid in the same transaction. Flash loans gained notoriety in the early 2020s when some coders used them to overload other DeFi protocols’ systems.
Flash loans could lower the token price temporarily by manipulating the funds’ ratio in liquidity pools, allowing fraudsters to purchase tokens for cheap and drain funds from the protocol.
Users can stake the AAVE token in Aave’s Safety Module, a large pool of reserves that the protocol can use if it falls into debt. The protocol offers returns of up to 9.1% per year for staking AAVE in this manner, but the risk is that the protocol may use the tokens to protect itself.
Technical Analysis and AAVE Token Price Prediction
Since mid-October, the price of AAVE tokens has been showing a steady increase and reached $129 by the end of last year. The current resistance level for the AAVE price is at $117, whereas the immediate support level is also at $87.9. If the bullish investors manage to overcome the current resistance, their next target could be $144.
Despite the efforts of bulls to regain support from the immediate level, recent trading sessions have indicated a weak trend.
The RSI level, which has decreased from 62 to 45, confirms this bearish trend. The recent falling trend can be attributed to all the noise regarding Bitcoin ETF approval.
This suggests that the hold of bulls on the AAVE price is weakening as they are now at the 50-day EMA, which is at $99.7. However, as long as the current support remains intact, the price prediction for the AAVE token remains bullish
Conclusion
Aave crypto pool enables quick lending and borrowing, but failure to pay back the loan on time could result in asset liquidation. Users can stake AAVE token in the Safety Module to avoid debt. The hold of bulls on AAVE price is weakening as it’s at the 50-day EMA of $99.7.
Technical Levels
- Support Levels: $87.9 and $69.13
- Resistance Levels: $117 and $144
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos or related indexes comes with a risk of financial loss.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
