Aave [AAVE] climbed more than 17% on September 29, rising from around $149 to above $175.
The rally of AAVE has placed it well beyond its highs made in September, and this is despite US government debt offering yields north of 5%! Safer yields from Treasuries hurt the DeFi space as investors no longer feel the incentive to invest.
AAVE breaks through its September ceiling
AAVE had already been gaining again before its last jump. It was trading under the $90 price level in mid-August but crossed the $120, $140 and then $150 price levels.
It was a sign that the latest rally was building on a steady climb rather than on a one-day spike.
Meanwhile, the chart shows that after passing the $150-$155 price region [the region which earlier rallies had been rejected], AAVE reached the $175 mark. In addition, AAVE was trading above its major price averages, which showed strength in recent and also a longer period of time.
AAVE may now approach the $180 price level from here, which is another big round figure where people tend to stop and take profits
Should it experience a pullback, the more important question is whether buyers return around the $150–$155 price areas. If it’s able to hold that area, that would mean that the former ceiling has become a floor. A fall below it could mean that the rally moved too quickly.
Why 5% Treasury yields matter for DeFi
AAVE’s rise comes during a difficult period for lending platforms.
The US Treasury daily yield shows that ten-year Treasury yields have moved above 5%, reaching levels that have not been seen since 2007.
These recent returns being seen compete with DeFi platforms for capital. Investors might question whether lending stablecoins through blockchain platforms is worthwhile if government bonds offer similar returns at a fraction of technical, and market risk.
Also, on September 28, there was an Aave risk proposal that was presented, which recommended adjusting the borrowing conditions of some assets.
One of the proposed changes concerned the borrowing rate for USDe, which was proposed to increase from 6.3% to 6.6%. The proposed increase in borrowing rates was based on recent borrowing activities, available liquidity, and the health of the open positions.
Yet, there were no clear signs to signify that a routine adjustment led to this price surge in AAVE. The hike is best termed as the continued demand for new tokens in DeFi. However, the surge occurs against the backdrop of increasing competition from traditional markets.
Final Summary
- Having shattered September’s highs clustered around $155, AAVE then blasted through $175.
- Holding $150-$155 would build on the rally, while a drop back below it could soften the breakout.