Aethir (ath) 
AAVE Price Drops 15% in Four Days, But Buyers Drive a Potential 20% Recovery
The price of AAVE experienced a significant dip, falling over 15% within four days from a peak of $283 on May 27 to an intraday low of $240. Despite this decline, buyers quickly stepped in, pushing the price back up to an intraday high of $254 before settling at $251. This rebound coincides with increased activity on the Aave protocol, particularly in the tokenized yield markets in collaboration with Pendle and Ethena.
New Collateral Types and Market Growth on Aave
On May 27, Aave introduced support for three new collateral types: eUSDe, July-maturity PT-USDe, and August-maturity PT-eUSDe. These additions brought an initial market size of approximately $700 million. The following day, Pendle launched two of these markets with supply caps of $100 million for PT-eUSDe and $40 million for PT-USDe. Both caps were fully reached within hours, prompting Pendle to raise the limits on May 29 to $200 million and $80 million, respectively. These expanded caps were also filled quickly, demonstrating strong demand for tokenized yield instruments on the Aave platform.
PT-USDe and PT-eUSDe are principal tokens that represent a fixed-yield claim on underlying assets locked in the Pendle protocol. These tokens enable users to trade and monetize future yield by separating the principal and yield components of their assets. While Ethena’s principal tokens were added to Aave a month prior, the support for the new collateral types (eUSDe, July PT-USDe, and August PT-eUSDe) was introduced on May 27, further expanding Aave’s offerings.
Increased Demand and Aave’s TVL Growth
Although these principal tokens do not directly influence the price of AAVE, they highlight growing interest in Aave’s decentralized finance (DeFi) platform. As more users supply assets to trade these tokens, Aave’s total value locked (TVL) continues to rise. As of May 20, Aave accounted for 20% of the total TVL in the DeFi sector, reflecting its dominance and broad adoption. This growth in TVL can positively impact AAVE holders, as increased adoption often boosts the network’s value and investor confidence.
Key Benefits of Aave’s Expanding Ecosystem
- Enhanced Yield Opportunities: By introducing new collateral types and supporting tokenized yield markets, Aave offers more diverse investment options for users.
- Increased Liquidity: The swift filling of supply caps signals strong demand and liquidity within the protocol.
- Growing TVL: Higher TVL solidifies Aave’s position as a leading DeFi platform, enhancing its ecosystem’s overall value.
AAVE Price Outlook: Potential 20% Upside
From a technical perspective, AAVE is poised for a potential 12% or more upward move from its current level of $251. The immediate resistance at $283 will be a critical level to watch. If AAVE manages to break above this resistance, the next target is the psychological $300 mark, which previously acted as strong support during December rallies. A move to $300 would represent a nearly 20% increase from its current price.
While short-term price fluctuations are inevitable, the recent dip may serve as a healthy bull retracement, forming a higher low within the broader uptrend. This setup aligns with increasing adoption and activity on the Aave protocol, which could further support AAVE’s long-term growth.
As the DeFi sector continues to evolve, Aave’s proactive steps in expanding its ecosystem and introducing innovative financial instruments keep it at the forefront of the industry. Investors should monitor key levels and developments within the protocol to capitalize on potential opportunities.
