AAVE, the cornerstone token of the DeFi lending platform Aave, has experienced a remarkable 12% price surge in the past day. This increase can be attributed to a newly proposed initiative to incorporate a Chainlink oracle with Aave’s protocol.
Currently, AAVE's trading value stands at $369.10, teetering near its three-year peak of $399.85.
On December 23, Chainlink unveiled Smart Value Recapture (SVR), an oracle solution intended to monetize profits derived from Maximum Extractable Value (MEV) and reintegrate them into DeFi ecosystems. Following this development, a proposal was introduced in Aave's governance forum by a community member, advocating for SVR's adoption within Aave’s lending architecture.
The core concern of the proposal highlights an imbalance in Aave's liquidation mechanisms, where liquidators and searchers traditionally reap outsized benefits, leaving limited gains for users. Employing Chainlink's SVR service aims to recapture MEV earnings, more equitably distributing proceeds among searchers, builders, and the protocol itself.
This initiative has sparked heightened trading activity for AAVE, evidenced by its recent double-digit value rise. Such momentum is further corroborated by an increase in open interest, now at a striking $376 million, up by 32%.
In derivatives markets, like futures or options, open interest signifies outstanding contracts yet to be settled. For AAVE, the rising open interest during a price rally suggests traders are increasingly committing to positions that align with the asset’s upward trajectory, signaling robust market confidence and potential for further gains.
Additionally, AAVE's Relative Strength Index (RSI) is trending upwards on daily charts, registering at 62.88. This indicator, reflecting oversold and overbought conditions, currently underscores an inclination toward buying AAVE, as seen at the time of writing.
Presently, AAVE hovers just beneath its three-year resistance level of $399.85. Sustained buying could breach this threshold, creating a new support level. Success in this breakout might see AAVE’s price surpass $400, a feat last achieved in 2021.
Yet, this bullish narrative could falter should sell-offs commence, potentially dragging AAVE’s price back to $323.46.