AAVE Price Analysis: Will the DeFi Renaissance Continue to Drive AAVE's Price Gains in 2025?

The decentralized finance (DeFi) industry experienced a renaissance in 2024 given that by the 17th of December, the Total Value Locked (TVL) had surged to a two-year high of $154 billion.

Decentralized finance (DeFi) had a banner year in 2024. According to data from DeFiLlama, the Total Value Locked (TVL) surged to a two-year high of $154 billion on December 17.

This growth sparked interest in DeFi protocols and tokens like Aave [AAVE]. In its yearly review, the AAVE protocol highlighted that net deposits reached a record high of $35 billion in 2024. This growth positioned AAVE as the largest DeFi platform.

Data from DeFiLlama further depicted growth as total monthly fees on the protocol reached a three-year high of $65.34M. Meanwhile, revenues amounted to $11.68M. The total amount borrowed on the protocol also surged past the $14 billion mark.

Surging activity drove AAVE’s price gains in Q4 2024, and if the same growth is recorded this year, it could bode well for the altcoin. However, despite the DeFi renaissance, the token’s daily chart showed potential bearish trends.

AAVE price analysis

AAVE, at press time, traded at $330 after a 6.4% gain in 24 hours. Despite these gains, the token’s one-day chart depicted a bearish double-top pattern.

AAVE had bounced from the neckline of this pattern at $299, indicating that bulls were attempting to maintain control.

If the buying activity depicted by the volume histogram bars continues and AAVE flips resistance at the two peaks ($391), it could invalidate the bearish thesis depicted by the double-top.

At the same time, the Relative Strength Index (RSI) line was tipping north. If this line crosses above the signal line to form a buy signal, it could ignite a rally toward the $391 resistance level.

The Awesome Oscillator also showed that the bearish trends were weakening due to the shortening histogram bars.

However, traders should also watch out for the crucial support at the neckline, as a breach below this level could cause a drop to $207.

Long/Short Ratio suggests…

On the derivative front, AAVE depicted a bearish bias due to a decline in the Long/Short Ratio. At press time, this ratio stood at 0.95, suggesting that traders with short positions were marginally higher than those with long positions.

While this decline could indicate negative sentiment, an increase in short positions while the price is rallying could result in a short squeeze if these positions are liquidated. The resulting buying pressure could push AAVE higher.