The AAVE price went on a remarkable bounce and attained $341 on December 23, which represents a 25% climb from its lowest level seen during the week. This surge coincided with AAVE’s market cap rise over the $5 billion mark.

The rally came amidst a broader recovery in the DeFi market, with other prominent tokens like Curve DAO Token and Raydium noting price increases. However, the coin’s surge wasn’t driven by any specific news tied to its protocol, which indicates that the price rise was part of a larger market trend.

DeFi tokens, which had suffered major declines during the bear market, were showing signs of resurgence as investor confidence returned to this ecosystem gradually. As a leading lending platform in the crypto space, strong fundamentals have positioned the coin to benefit from such a recovery.

Declining Exchange Balances: A Bullish Indicator

The most notable event that supports the coin’s price resurgence is the decline in the coin’s exchange balance. AAVE tokens on exchanges have dropped to 5.51 million, down 2.27% week-over-week.

This is an indication that investors would rather hold their tokens instead of selling them, reflecting community confidence in the coin’s long-term prospects. When exchange balances for any coin drop, it is usually a bullish indication because it means investors are not looking to sell their digital assets soon.

This is not surprising, as it reflects the general trend in the crypto market, where a lot of investors are increasingly adopting a long-term outlook.

Smart Money Activity: A Strong AAVE Buy Signal

Meanwhile, smart money investors’ interest in the AAVE token is lending strength to its price. According to data from Nansen, smart money investors holding AAVE have increased to almost 50 from below 30 in June.

The nature of these wallets indicates that they are institutions or high net-worth individuals. Smart money balances have now surpassed 430,000 tokens, from a year-to-date low of less than 340,000.

This increase in holdings could mean that these smart investors expect the coin’s price to continue higher over the coming months. Notably, every time smart money has stacked up huge amounts of any token, it has always signaled a bull phase for such a token, and AAVE is no exception.

Besides the traditional institutional investors, World Liberty Financial, owned by the Donald Trump family, has also bought over 6,000 AAVE tokens valued at more than $2 million. The firm is one of the largest holders and further confirms growing institutional interest in AAVE.

Strong Fundamentals and the Market Position for AAVE

In the DeFi space, Aave now governs $19.6+ billion of value across its assets on Ethereum, Polygon, and Arbitrum, having risen to the top in decentralized lending. A set of unique features has been integrated into this protocol to make the platform user- and developer-friendly.

Such features, which include flash loans and liquidity pools, have formed the foundation for AAVE’s innovations, making it competitive with other DeFi protocols. Currently, the network is the second-largest DeFi protocol by total value locked-a position.

The efficiency at which the platform can process large volumes of liquidity lends credence to its leading position in the DeFi space. In fact, almost every time the market becomes highly volatile, AAVE has come out even stronger.

AAVE Technical Indicators Suggest Further Upside

Technical indicators also suggest that the token’s price could rise further in the coming weeks. On December 20, the price displayed a hammer candlestick formation, a reversal pattern after a price decline.

This formation reflects a change in market sentiment from bearish to bullish, which could indicate that the token is poised for longer-term price appreciation. Furthermore, the coin is getting closer to the weak, stop, and reverse level of the Murrey Math Lines — a method used to predict possible price resistances and supports.

Several other key technical metrics also bolster AAVE’s price. First, the token’s Relative Strength Index (RSI) is currently in neutral territory, suggesting there is a possible upside ahead before AAVE is overbought.