The central theses
- After a 150% rally this year to date, Uniswap appears to have hit the overbought territory.
- Likewise, Aave appears poised to regress after a certain technical indicator presented a sell signal on its 3-day chart.
- On the flip side, Yearn Finance’s whales appear to be clustering heavily in preparation for higher highs.
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Uniswap and Aave have seen an impressive upward trend in the past few days, increasing their market value by more than 70%. However, these DeFi tokens appear to have reached a point of exhaustion as Yearn Finance prepares to catch up with the bull run.
Uniswap takes the lead in correcting DeFi
Uniswap has been on the rise lately as token price has skyrocketed over 70% in the past three days. UNI rose from an opening low of $ 7.60 on January 22nd to a new all-time high of $ 13.30 recently.
Despite UNI’s massive gains in such a short period of time, the Tom Demark (TD) Sequential Indicator suggests that the cryptocurrency is floating in overbought territory. This figure represents a sell-signal on the UNI 9-hour chart.
The bearish formation developed as a green nine-candle and predicted a one to four 9-hour candle correction or the beginning of a new downward countdown.
An increase in selling pressure behind Uniswap could help confirm the pessimistic outlook, regardless of the strength of the current uptrend.
UNI / USD on TradingView
A look at UNI’s 9 hour chart shows that the TD setup was incredibly accurate in anticipating local highs in its trend. The last two times this technical index showed a sell-signal within this timeframe in the past month, a steep correction followed.
After a 55% rally between January 15th and January 18th, UNI took a 27% nosedive which was perfectly timed by the TD Sequential.
Therefore, the current pessimistic forecast must be taken into account, although Uniswap is still in pricing mode.
UNI / USD on TradingView
If sell orders pile up around current price levels and UNI pushes below the USD 11 support level, a steeper decline is likely to take place.
On its way down, the UNI token could find support around the 50% or 38.20% Fibonacci retracement level. These areas of critical interest are $ 10.20 and $ 9.40, respectively.
UNI / USD on TradingView
It’s worth noting that if Uniswap breaks the overhead resistance barrier at $ 12 instead, the bearish outlook will be hurt. If so, this altcoin could retest its recent all-time high of $ 13.30 and potentially move towards $ 15.
Aave is aiming for a steep decline
Aave looks technically identical to Uniswap. The price is up more than 80% since Jan 22, from a low of $ 160 on Jan 22 to a new record high of $ 290 recently.
In view of its high correlation with the UNI token, the AAVE token also appears to be prepared for a steep correction.
The TD Sequential flashed a sell-signal in the form of a green nine-candle on the 3-day chart of AAVE. If sell orders pile up, the bearish pattern is likely to be confirmed, resulting in a one to four 3-day candlestick retracement before the uptrend resumes.
AAVE / USD on TradingView
Based on historical data, the TD setup was incredibly accurate in anticipating significant pullbacks ahead of AAVE. At the end of August 2020 there was even a sell-signal just before the price of this altcoin collapsed by almost 73%.
Similar market behavior has emerged over the past year as all sell signals from this technical index have been validated within the 3-day chart.
For this reason, it makes sense to proceed as a precaution when trading this crypto currency at the current price level.
AAVE / USD on TradingView
Should there be a sell-off today like the end of August 2020, the market value of AAVE would plunge towards USD 90. But for this to happen it must first cut through three significant areas of support based on the Fibonacci retracement indicator.
These critical price hurdles are $ 200, $ 160, and $ 130, respectively.
AAVE / USD on TradingView
Nonetheless, a surge in buy orders around current price levels could be strong enough to push Aave above its recent high of $ 300. In such circumstances, the pessimistic thesis will be jeopardized and this cryptocurrency will rise towards USD 500 or higher.
Longing attempts to steal the limelight
While Uniswap and Aave have seen massive gains over the past few days, Yearn Finance has remained inactive, awaiting a surge in demand. This altcoin has only increased about 29% since January 22nd while the other two coins have withdrawn.
But if YFI saw similar price movement as UNI and AAVE, its market value would rise to $ 50,000.
AAVE / USD, UNI / USD, YFI / USD on TradingView
While speculation about Yearn Finance’s upside potential is mounting, large investors seem to be adding more tokens to their portfolios.
Santiment’s owner distribution chart shows that the buying pressure behind this cryptocurrency has steadily increased since the beginning of the month. The behavior analysis company saw a significant increase in the number of YFI whales on the network.
In fact, the number of addresses with 100 to 1,000 YFI has increased by 8.30% since then. About three new whales have joined the network in such a short amount of time.
The recent surge in the major investors behind Yearn Finance may seem insignificant at first glance. But when you consider these whales hold anywhere from $ 3.2 million to $ 32 million in YFI, the sudden surge in buying pressure could mean millions of dollars.
YFI holder distribution to Santiment
Still, Yearn Finance faces a massive barrier of resistance that it must overcome in order to move forward. Based on IntoTheBlock’s In / Out-of-the-Money-Around-Price (IOMAP) model, more than 820 addresses had previously purchased nearly 4,000 YFI for around $ 33,000.
Just a daily candlestick just above this supply wall will give the optimistic outlook even more credibility.
In / out of the money at the price of IntoTheBlock
On the other hand, the IOMAP cohorts show that Yearn Finance is on stable support. Over 600 addresses hold approximately 4,200 YFI at $ 30,000.
This significant area of demand may have the strength to limit the downside of the altcoin as holders are likely to do whatever they can to avoid losing their investments.
The DeFi market is advancing
While Bitcoin appears to have entered a new phase of correction, the DeFi market is booming.
Altcoins like Uniswap and Aave have taken the lead in the most recent run as more capital is pouring into them. On-chain data from DeFi Pulse shows Total Value Locked (TVL) at UNI is approaching $ 4 billion, while AAVE recently passed the $ 3 billion mark.
On the flip side, Yearn Finance has seen 30% growth since the start of the year, which could soon be reflected in its market value.
Time will tell whether the support levels of each cryptocurrency will hold and whether prices will continue to rise.
Disclosure: At the time of writing, this author was holding Bitcoin and Ethereum.
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