Is Aave a good investment? DeFi sector stays strong despite the market downturn

Written by: Ilija Rankovic
January 22, 2021
  • Aave posts double-digit gains on booming fundamentals despite market retracement.
  • The cryptocurrency contests the $200 level after establishing support just below $180.
  • Aave will most likely not break the level it currently contests due to the overall crypto market conditions.

Aave managed to outperform the majority of the crypto sector as its price remained almost unaffected by the market downturn caused by Bitcoin’s brief dip below $30,000. In fact, the finance protocol token recorded double-digit gains in the past 24 hours. So, is Aave a good buy at the moment?

Fundamental analysis: Aave prospers as part of the seemingly more resilient DeFi market

Aave is a decentralised finance (DeFi) protocol that is created with the idea to allow its users to lend and borrow cryptocurrencies. Aave was (as well as its predecessor ETHLend) founded by Stani Kulechov. The project has picked up market traction due to its strong fundamentals, making it one of the top decentralized finance ventures.

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Aave’s overall outlook is bullish, mostly due to its extraordinary fundamentals. The project continuously helps the market by sponsoring events and giving grants to other perspective ventures. Aave managed to post week-over-week gains of 19.36%. When compared to other cryptocurrencies, BTC posted a loss of 12.47%, while ETH managed to gain 2.40% over the same period.

At the time of writing, Aave is trading for $194.5, representing a price increase of 113.55% compared to the previous month’s value.

AAVE/USD technical analysis: Aave posts double-digit gains amid market retracement

Aave has managed to remain not only relatively healthy during the recent price downturn, but to actually post double-digit gains in the past 24 hours. The cryptocurrency has created a head and shoulders pattern that started on 16 Jan. This type of chart formation is considered a fairly bearish indicator. However, Aave’s recent gains heavily outperformed the rest of the top cryptocurrencies, and completely ignored the chart formation (for now). It’s important to note that there are a couple more cryptocurrencies with gains par with Aave’s, most of them coming from the DeFi sector.

Aave faces a very strong zone of resistance slightly below the $200 mark, while it’s strong support levels are located just above $15, as well as in the 50-day EMA.

AAVE 4-hour chart
AAVE/USD 4-hour chart

AAVE’s RSI on the 4-hour time frame slowly descended to the mid-range, but started ascending once again as bulls enter the market in recent hours. Its current value sits at 55.78.

AAVE hourly chart
AAVE/USD 1-hour chart

Aave’s hourly time-frame shows with how bulls took over the market after hitting the $150 support level. The cryptocurrency then established short-term support with its 50-hour EMA, creating a large new opportunity for upside. This has, in turn, propelled its price above the $190 mark and towards the $200 l level. However, a break above the $200 level is likely unachievable at the moment, mostly due to the overall crypto market conditions.