AAVE surged more than 4% on Saturday after experiencing a slight correction from its previous gains. The move followed key on-chain indicators and an ascending triangle pattern, suggesting that AAVE is likely to see a strong rally in the coming days.
AAVE On-Chain Metrics Show Long-Term Investors Expect Higher Prices
Realized capitalization values each coin based on the price it last moved. AAVE’s realized capitalization shows that a capitulation event occurred on July 16, when investors dumped their tokens. This event occurred after AAVE increased by nearly 40% from July 5 to 15.
After a brief correction, AAVE continued to rise until August 2, when the market crash caused most investors to realize profits and losses.
Recent price movements may have weeded out weak investors as the 365-day Market Value to Realized Value (MVRV) ratio shows most long-term investors are sitting on a 17.5% return.
The 365-day MVRV ratio measures the profit or loss of all coins purchased within the past year. An increase above zero in this indicator shows that long-term investors are making a profit, and vice versa if it decreases.
AAVE MVRV (365d) and Dormant Circulation (365d) Indexes | Source: Santiment
Despite the recent price surge, AAVE’s 365-day Dormant Circulation, which measures the movement of coins last traded in the past year, is low, indicating an unwillingness of long-term investors to sell. This suggests expectations of future price increases from this group.
AAVE is forming an ascending triangle pattern
On the daily chart, AAVE appears to be forming an ascending triangle pattern after creating a series of higher lows based on the rising trendline starting from July 5. The only exception was the crash of the entire crypto market on August 5.
AAVE/USDT Daily Chart | Source: TradingView
However, AAVE has resumed its uptrend and is attempting to break above the triangle resistance line at $118.71. If successful, AAVE could rise above the yearly high resistance of $154.86 on March 13 and higher to the pattern target at $167.82.
The Relative Strength Index (RSI), which has crossed above its midpoint and moving average, could provide momentum to the move.
However, the Stochastic Oscillator is in the oversold zone, suggesting that AAVE could undergo a correction.
If the daily candle closes below the support around $84, the bullish thesis will be invalidated.
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