AAVE Dips to $200: Key Support Levels to Monitor Before a Potential Reversal
The decentralized finance (DeFi) token AAVE has seen increased selling pressure in recent weeks, leading to a sharp decline in price. After briefly rallying to $385 in August, AAVE has now dropped back to the psychologically significant $200 level. Despite efforts to restore market confidence, including a notable token buyback initiative, bearish momentum continues to dominate the market.
In August, AAVE experienced a strong rally driven in part by renewed interest in DeFi projects and the ongoing token repurchase program. The Aave protocol had approved a $50 million buyback plan, targeting up to $1.75 million worth of AAVE per week, depending on revenue and other internal metrics. Since the program’s pilot phase launched in May, over $22 million worth of tokens—approximately 94 million AAVE—were removed from circulation. This deflationary effort initially helped boost market optimism, pushing prices to the upper end of a defined trading range.
However, that breakout proved to be short-lived. As broader market sentiment waned—fueled in part by a Bitcoin correction below key support levels—AAVE’s price reversed course. The token failed to maintain support at $336 and subsequently fell below the $221 floor, which had previously defined the bottom of its trading range. This breakdown confirmed a bearish market structure, with sellers gaining the upper hand.
Technical indicators reinforce the downward trend. AAVE has continued to form lower highs and lower lows on the daily chart. A bearish crossover between the 20-day and 50-day moving averages further supports the ongoing downtrend. The once-supportive $210–$225 zone has now flipped into a resistance level. This suggests any attempts at recovery may be met with strong selling pressure.
In addition, data from CoinGlass offers deeper insight into the market’s bearish tilt. Over the past month, taker sell orders have consistently outpaced taker buys, highlighting persistent downward pressure. As of the latest data, the long/short ratio sits around 0.918, indicating a bearish bias among leveraged traders. This imbalance suggests that AAVE could face further declines before any substantial recovery occurs.
With AAVE now hovering near the $200 mark, traders are closely watching two major support levels: $170 and $141. These levels represent potential zones where buyers might step in, particularly if oversold conditions trigger a short-term bounce. However, a failure to hold these supports could open the door to even deeper losses, especially if the broader crypto market remains under pressure.
Why the Buyback Program Isn’t Enough
While the buyback initiative was a strategic move aimed at injecting confidence into the market, its impact appears limited in the current macroeconomic environment. Investor appetite for risk assets, particularly in DeFi, has diminished amid rising global interest rates and regulatory uncertainty. Even with the reduced circulating supply from buybacks, demand for AAVE remains muted. This illustrates the limitations of protocol-driven interventions in the face of broader market pessimism.
What Could Reverse the Trend?
For AAVE to mount a meaningful recovery, several conditions would need to align. First, a stabilization or recovery in Bitcoin’s price would likely lift overall market sentiment. Additionally, a renewed influx of total value locked (TVL) across DeFi platforms could support a reevaluation of AAVE’s long-term potential. On-chain data showing increased usage of the Aave protocol—such as higher lending and borrowing activity—would also be a bullish signal.
Traders may also look for bullish divergences in momentum indicators like the Relative Strength Index (RSI) or MACD (Moving Average Convergence Divergence) as early signs of a reversal. However, as of now, these indicators remain bearish, reinforcing the likelihood of more downside in the short term.
Macroeconomic and Regulatory Factors at Play
Beyond technical indicators and protocol-specific developments, macroeconomic trends are playing a significant role in shaping market dynamics. Persistent inflation concerns and central bank policies have led investors to move away from high-risk assets, including cryptocurrencies. In addition, increasing regulatory scrutiny of DeFi platforms could weigh further on investor sentiment towards tokens like AAVE.
The U.S. Securities and Exchange Commission (SEC) and other global regulators have hinted at tighter control over decentralized finance, which could impact protocols that rely heavily on community governance and smart contracts. Any future enforcement actions or policy changes could either create uncertainty or, conversely, provide clarity that encourages institutional interest.
Investor Strategies in a Bear Market
In a bearish scenario like the one currently unfolding with AAVE, investors often shift toward capital preservation. Dollar-cost averaging (DCA) into long-term positions, setting stop-losses to manage risk, and focusing on fundamental metrics rather than short-term price action are common strategies. Moreover, some traders may explore yield farming or staking options within the Aave ecosystem to generate passive income while waiting for a market turnaround.
What to Expect Next
Unless AAVE can reclaim and hold above the $225 resistance level with strong volume support, the bearish outlook remains in play. A drop to the $170 or even $141 support levels appears increasingly probable. These zones may provide a better risk-reward entry point for traders with a long-term bullish outlook.
In conclusion, while AAVE has strong fundamentals and continues to be a prominent player in the DeFi space, the current market structure suggests further downside is likely. Traders should keep a close watch on key support levels and broader market signals before making any bullish bets. Until signs of reversal emerge, caution remains the most prudent approach.