The recent Aave governance saga stirred significant volatility, causing the DeFi protocol's native token, AAVE, to experience a sharp decline. However, what appeared as a market setback for some was identified as a strategic entry point by smart money, leading to a notable shift in ownership dynamics.
Smart Money Capitalizes on Volatility
Amidst the Aave governance drama, which saw AAVE's price tumble by 20% and erase over $500 million from its market capitalization, a distinct pattern of accumulation emerged from large holders. The Top 100 Addresses significantly increased their AAVE holdings, adding approximately 8% to the total supply and now controlling a dominant 80% of the overall supply. This period also witnessed a remarkable 66% surge in the number of whale wallets (those holding over $1 million in AAVE), indicating substantial demand from institutional-level investors as retail investors largely retreated.
Shifting Selling Pressure and Future Outlook
Initially, the governance tensions and the Christmas voting period spurred a considerable increase in AAVE tokens held on exchanges, rising from 1.22 million to 1.43 million coins, which corresponded with the sharp price drop. However, following pledges from Aave Labs and founder Stani Kulechov to share non-protocol revenue with tokenholders, selling pressure subsequently eased, with tokens on exchanges declining to 1.31 million. Despite the de-escalation, the full resolution of the drama is still pending. On the price charts, AAVE bulls are making efforts to reclaim the crucial 50-day Moving Average at $174. A successful breach of this level, ideally after consolidating between $160 and $174, could signal a bullish market structure shift and potentially propel AAVE by 30% towards the $210-$220 range. Conversely, a failure to hold the $160 support level would invalidate this optimistic outlook, risking a retracement back to $140.
