Will AAVE break $165? Key factors that could drive the rally

• AAVE could rally to the next resistance at $165 as buying pressure grows.
• Declining exchange reserves and rising DeFi activity could be the catalysts behind the next rally.

Aave [AAVE]has been under bearish pressure amid a 6% price decline in the last seven days. However, the altcoin is now showing signs of a rebound after bouncing by 2.3% in 24 hours to trade at $147 at press time. 

On the daily chart, the bearish trends appeared to weaken. This was after the Awesome Oscillator (AO) flipped green. The AO is still negative, which shows that bears are still in control but a trend reversal could be on the horizon. 

The Chaikin Money Flow (CMF) supports the bullish thesis after trending upwards and flipping to positive. This indicator shows that buying pressure is now outweighing selling pressure, which could precede a rally.

Source: Tradingview

If AAVE’s uptrend strengthens following these bullish signs, the next resistance level will be the 0.236 Fibonacci level ($157). Breaking this level will pave the way for another rally towards $165. 

Besides the technical indicators, on-chain metrics also show that an uptrend is possible. 

Exchange reserves plummet

AAVE exchange reserves have dropped to record lows suggesting that the selling pressure is easing. 

Data from CryptoQuant showed that since mid-October, exchange reserves have been dropping steadily despite the slight bounces in price.

Source: CryptoQuant

Few exchange reserves show that there is less AAVE available on exchanges to sell. This gives room for a price recovery. Moreover, if there is a sudden surge in demand while supply on exchanges remains low, the altcoin could make a solid bounce. 

AAVE DeFi TVL increases 

AAVE is also poised for a solid price recovery because of the steady growth of its decentralized finance (DeFi) Total Value Locked (TVL). 

AAVE is the second-largest DeFi protocol. Its TVL stood at $13.05 billion at press time per DeFiLlama and has increased by nearly $500 million since the start of the month. 

Source: DeFiLlama

A surge in DeFi activity is usually a catalyst for price gains as AAVE is the native token used to support transactions on the protocol. 

Read Aave’s [AAVE] Price Prediction 2024–2025

Lastly, AAVE’s token holders could also influence the rally. At press time, 57% of holders were in profits per IntoTheBlock. Additionally, nearly 18,000 addresses bought the token above $155. 

Therefore, if AAVE continues the uptrend, it is bound to face resistance at $155 if these holders decide to book profits.