AAVE price declines by 7% despite V3 receiving approval to deploy on Ethereum

  • AAVE price fell to $80 on Tuesday after failing to break the resistance level at $88.
  • The proposal, if approved, will allow Aave to run V3 on the world’s largest DeFi blockchain.
  • Ethereum is shaping up to be the biggest Aave market, which is why instead of updating V2, a new V3 will be implemented on the blockchain.

Aave has been a leader in the decentralized finance (DeFi) space for a long time, even positioning itself as the largest DeFi protocol at one point. Despite losing 77.89% of the total value locked on the platform, Aave remains the largest lending protocol in the world, thanks to its multiple iterations, the latest being V3.

Aave V3 comes to Ethereum

Aave, in its latest governance proposal, proposed deploying its third iteration on Ethereum. The proposal, if approved, will activate the Aave V3 Ethereum pool and list seven pre-approved tokens on the platform, including USD Coin (USDC), DAI, LINK, and AAVE.

Since its release in March 2022, Aave V3 has been deployed on multiple blockchain networks, including Polygon, Optimism, Avalanche, and Arbitrum. However, the decision to implement it on Ethereum almost a year later seems to be calculated to eliminate any existing bugs in V3.

This is because Ethereum is the biggest market when it comes to borrowing and borrowing, which Aave mostly dominates with its $4.5 billion TVL.

Voting on the governance proposal is still in progress with a 100% approval rate, and when approved, V3 will be deployed on Ethereum on January 27. Ethereal is its largest market, the Aave community has decided to roll out a new version of V3 instead of updating the V2 group.

In this way, the compatibility between the V3 groups will be better and the overall complexity will also be less.

AAVE price does not match

Surprisingly, the AAVE price did not react positively to this development, as the altcoin fell more than 7.5% on Tuesday. At the time of writing, AAVE could be seen trading at $80 even though it almost broke above the immediate resistance at $88.

However, this is not the end of the AAVE rally, as no bearish influence caused the price to fall. The decline was a result of the cooling that followed AAVE’s nearly 70% rally. Therefore, once the altcoin has settled, the chances of a rally are high if the cryptocurrency it manages to bounce off the support level at $77.

This would give the AAVE price another shot at breaking the immediate resistance at $88, allowing the cryptocurrency to rally to $96. Shifting this level to a support floor is crucial for the altcoin, as only then will it be able to rally further towards its next resistance level at $103.

AAVE/USD 1-day chart

But if the cooling extends into a correction and AAVE loses the $77 support, it could decline further towards $69 and $67. Losing the latter will result in price falling to the critical support level at $58, and a daily close below it will invalidate the bullish thesis, as well as all gains made in the last three weeks.


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