AAVE bounces off its 50-day moving average; are the bulls back?

• AAVE sees a surge in demand in a pivot that could potentially yield more upside in October’s second half.
• AAVE supply held by top addresses indicates growing accumulation.

AAVE has been one of the best cryptocurrencies for traders looking to trade. This is because it has been trading in a wedge pattern underpinned by descending resistance and ascending support.

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One would expect AAVE to continue dipping but there was the chance that it might turn bullish in the next few days. A resistance retest is also possible based on multiple observations. The first is that it experienced a substantial demand resurgence in the last 24 hours after previously interacting with its 50-day moving average.

Source: TradingView

AAVE should technically seek more downside based on the wedge pattern. However, the bullish volume in the last 24 hours suggested the likelihood that the bulls might regain control. The DeFi token has been achieving higher lows for the last few months suggesting that demand has been improving.

Are the stars aligning for AAVE’s short-term price action?

The above observation also aligned with some of AAVE’s latest on-chain characteristics. For example, the supply of AAVE held by top addresses witnessed growth and, at press time, was at its highest monthly level. This confirmed that the whales were accumulating and could potentially lead to higher prices.

Source: Santiment

Similarly, Aave’s ecosystem maintained healthy development activity during the same four-week period. This may boost investor sentiment. These findings could support the case for AAVE’s bullish recovery which would allow it to recover the gains lost in the first half of October.

Read about AAVE’s price prediction for 2024

The demand recovery in the last 24 hours was the consequence of a surge in bullish volume. This was evident as a sharp volume spike in the last 24 hours at the time of writing. Its market cap grew by roughly $50 million during the same period. This highlighted the substantial influx of liquidity during the same period.

Source: Santiment

AAVE’s relatively heavy liquidity inflow may not necessarily be a random market reaction. The DeFi protocol announced the activation of token switching within its ecosystem. This will introduce a new level of efficiency for users and could make the platform more appealing.

You can now switch tokens directly on https://t.co/gzkAogjUOS pic.twitter.com/khNDXBBo2i

— Aave (@AaveAave) October 19, 2023

Based on the above information, it is clear that there is a chance that AAVE bulls may push for another rally. However, traders should also be cautious of an unexpected resurgence of sell pressure.

A potentially sharp one if the current bullish expectations attract heavily leveraged bullish positions. As such, traders should keep an eye on whale activity to establish whether the latest demand could be a false positive.