AAVE's "bad news" signals seem even more dangerous... Even after the SEC investigation ends, the price continues to decline

AAVE is showing a weak trend around $185 Wednesday. The interesting part is that it’s a contrary signal. The U.S. Securities and Exchange Commission(SEC) officially concluded its 4-year investigation, but instead of rising, the price declined. “Good news coming out but unable to rise means the supply and demand are even weaker,” seems to be the market’s more sober judgment.

The Paradox of Good News… “Investigation Closure” Did Not Provide a Price Floor

Aave founder and CEO Stani Kulechov(Stani Kulechov) announced the completion of the SEC’s 4-year investigation via X(Twitter). Although the DeFi industry has been suffering from regulatory uncertainty recently, the message was that developers can now focus more proactively on development.

In the medium to long term, this is definitely positive. Reduced regulatory risk makes it easier for institutional funds to enter, and the growth path of protocols becomes clearer. However, the reaction in the spot and futures markets has gone in an unexpected direction.

On the day this news was announced, AAVE actually fell 3.48%. Good news did not support the price. This may seem paradoxical, but from the market’s perspective, it can be read as a “already priced-in good news” signal.

What Futures Markets Are Telling Us… Position Adjustments Are Larger Than New Entries

The weak trend in AAVE is supported by signals from the derivatives market. According to Binance, open interest(OI) fell to $56.60M on Wednesday, hitting a low not seen this year.

A decrease in OI means existing positions(long/short) are being liquidated. If a strong rally were to occur, “new funds + new leverage” would need to flow in. But the current trend is the opposite. As market interest wanes, it seems existing positions are being closed. This is enough to serve as a short-term bearish signal.

Technical Setup… The More Defensible the Support, the Greater the Risk of Breakage

On the chart, AAVE failed to break through an important resistance. On December 10, the rally stopped at the 50-day EMA($198.64), and then it declined about 8%. This level is not just a simple technical resistance but also overlaps with the upper trendline of the descending channel, carrying a psychological meaning that “breaking through would change the sentiment.”

Currently, the price is at $174.16, which, despite a recent +4.95% increase, remains below the long-term resistance.

The bearish scenario has clear levels:

• In case of continued decline: test of the daily support at $179.27
• If the close is below $179.27: deeper correction possible, with weekly support at $160.51

Conversely, momentum indicators also suggest weakness. RSI is at 47, below the neutral 50, and MACD is increasing the likelihood of a bearish crossover.

To aim for a rebound, first the $198.64(50-day EMA) must be recovered. Only after reclaiming this level can we interpret that “the good news of regulation ending is starting to be reflected in the price.” For now, that path seems distant.