Aave (AAVE) has dropped below the $120 level on Tuesday after testing the channel resistance on Monday, indicating that sellers remain active in the zone.
The bearish performance comes as ParaFi Capital transferred 42,000 AAVE tokens to Coinbase Prime over the past 10 hours, with traders taking this movement as a potential selling signal.
The derivatives data also show that traders remain cautious, with funding rates negative and short bets rising among traders.
Negative funding rate adds confluence to a bearish outlook
On-chain tracker Lookonchain revealed a few hours ago that Aave investor ParaFi Capital transferred 42,000 AAVE tokens, worth $5.27 million, to Coinbase Prime over the past 10 hours.
This is regarded as a potential sell signal as exchange-linked deposits usually imply that a whale is about to offload some of their bags.
The derivatives data also support a bearish outlook. According to CoinGlass, Aave’s funding rate flipped negative on Monday and now reads -0.040%, the lowest level since October 11.
It is now nearing levels seen during the October 10 market dip.
The negative rates indicate shorts are paying longs, suggesting bearish sentiment toward AAVE.
Furthermore, Aave’s long-to-short ratio reads 0.97 on Tuesday.
The ratio dropping below 1 indicates that traders are holding a bearish sentiment towards the market.
AAVE price forecast: AAVE faces further downward pressure
The AAVE/USD 4-hour chart is extremely bearish after failing to break above the $132 resistance level on Tuesday.
At press time, it is trading at $112, below the 50-day and 100-day Exponential Moving Averages (EMAs).
These moving averages keep the broader trend negative, making it harder for the bulls to push for a recovery.
The Relative Strength Index (RSI) on the 4-hour chart hovers just below 50, signalling fading bearish pressure.
However, the Moving Average Convergence Divergence (MACD) line stays above its signal line and in positive territory, suggesting buyers retain short-term control.
If the bulls regain control, AAVE will face initial resistance at the $124 zone, with another major hurdle at $142.69.
Overcoming these resistance levels would allow the bulls to regain control and push AAVE’s price higher in the medium term.
AAVE has dropped below the $114 support level, suggesting a growing bearish momentum.
If the momentum grows stronger, AAVE will retest the $110.50 support.
A loss of this area would expose the AAVE’s price toward the mid-$80s over time.
However, as long as the bulls defend the $110.50 support level, the short-term recovery theme within the broader downtrend remains in place.
The market remains volatile as the situation in the Middle East escalates.
This makes it harder for several cryptocurrencies to embark on a recovery attempt.
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