Aave v3 launch triggers 50% rally from long-term descending channel pattern

Market Analysis

The decentralized finance (DeFi) market has been undergoing a period of maturation over the past year and many of last year’s fast risers have faded into obscurity but this does not mean the formerly “famous” protocols have not continued to build.

One blue-chip project that is regaining momentum is Aave (AAVE), a non-custodial liquidity protocol that allows users to lend, borrow or stake their assets to earn yield from their holdings.

Data from Cointelegraph Markets Pro and TradingView shows that the price of AAVE has rallied 110% from a low of $114 on March 15 to a daily high at $242 on March 29 as its 24-hour trading volume spiked 442% to $1.26 billion.

AAVE/USDT 4-hour chart. Source: TradingView

Three reasons for the price resurgence in AAVE have been the release of AAVE v3, the expansion of the protocol’s ecosystem and steadily improving fundamentals.

AAVE v3

Traders have long anticipated the release of Aave v3 which was announced on March 16.

According to Aave, the new features will help provide greater capital efficiency, increased security and cross-chain functionality, while also helping to promote decentralization across the DeFi ecosystem.

Some of the new features include portals, which offer only “permit listed” bridge protocols that have been approved by Aave governance to facilitate cross-chain transactions, a high-efficiency mode (E-Mode) that allows users to extract the most out of their collateral by providing a higher borrowing power within the same asset category and an isolation mode which limits the available collateral for newly listed assets as a way to help limit exposure and risks to the protocol.

Aave v3 is currently deployed on Polygon, Fantom, Avalanche, Arbitrum, Optimism and Harmony, with more integrations planned in the future.

Ecosystem expansion

A second factor bringing fresh momentum to AAVE has been the expansion of the Aave ecosystem, which includes launching on new networks and forming partnerships and integrations with other DeFi protocols.

On top of now being available on seven different networks, Aave continues to explore new networks to launch on, including Metis.

Aave has also seen an uptick in support from wallet providers and Web3 aggregators, including Instadapp, Debank, 1inch, Paraswap, Zapper, DeFisaver and Zerion.

Related: Aave launches v3 liquidity pool following unanimous governance decision

TVL is on the rise

A third sign of the building strength for Aave can be found by looking at the community behind the protocol, which has continued to see new users onboard into the ecosystem despite the wider struggles of the DeFi sector.

Total Aave users over time. Source: Dune Analytics

According to data from Dune Analytics, there are now more than 92,000 unique wallet addresses that have engaged with the AAVE protocol. With the number of chains supported by Aave continuing to increase, there is a strong possibility that this number will rise further in the future.

As a result of new users and the addition of support for new chains, the total value locked (TVL) on the protocol is once again on the rise and currently sits at $13.99 billion according to data from DeFi Llama.

Total value locked on Aave. Source: Defi Llama.

The recent addition of support for liquid staking assets such as stETH from Lido Finance has also helped boost the TVL on AAVE, possibly because ETH stakers are looking to maximize their return.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for AAVE on March 24, prior to the recent price rise.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (grey) vs. AAVE price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score for AAVE climbed to a high of 73 on March 24, around one hour before the price began to increase 45.8% over the next five days.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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