Aave price is trading near $111 as traders react to a $27 million liquidation error that briefly shook confidence in the lending protocol.

Aave (AAVE) slipped on Wednesday as traders reacted to a recent liquidation incident on the protocol. At press time, AAVE was trading at $111.45, down 2.2% over the past 24 hours.

During the past week, the token moved between $105.31 and $118.70. The price has attempted to recover from the February lows, but it has repeatedly stalled. The market has not yet returned to the levels observed prior to the earlier decline, and momentum is still weak.

Trading activity has cooled slightly. Daily trading volume reached about $29 million, which is 11% lower than the previous day. CoinGlass data also shows softer activity in derivatives markets. Futures volume fell 14% to $300 million, while open interest dropped 4.97% to $190 million.

When both volume and open interest fall at the same time, it usually means traders are stepping back and closing positions.

Liquidation glitch sparks concerns among traders

The decline in sentiment follows an unusual liquidation event on March 10 that affected several users of the Aave lending platform.

The incident was not caused by a hack or a sudden market crash. Instead, it stemmed from a configuration problem in CAPO, Aave’s internal risk management oracle used to monitor collateral prices.

The issue affected positions that used wstETH, the wrapped staked ether token issued by Lido, as collateral. A mismatch between an exchange-rate snapshot and its timestamp caused the system to read the wstETH-to-ETH price incorrectly.

Because of the error, the oracle undervalued the asset by roughly 2.85%. Several accounts suddenly appeared under-collateralized even though their positions were healthy on-chain.

As a result, around 34 user accounts were liquidated, and approximately 10,938 wstETH, worth about $27 million, was sold through automated liquidation processes. Liquidation bots earned close to 499 ETH through bonuses and fees.

After the issue was identified, Chaos Labs, which helps monitor risk parameters on Aave, worked with the protocol team to correct the configuration. The protocol itself remained solvent and did not accumulate bad debt.

Aave said affected users would be compensated using recovered funds and DAO resources. The Aave DAO and Lido both signaled support for reimbursing impacted accounts.

Although the problem was quickly fixed, the event reminded traders that technical errors can still trigger liquidations in DeFi systems.

Technical analysis: Aave price stuck inside descending channel

On the chart, Aave is trading inside a descending channel, a pattern that appears when prices register lower highs and lows. The upper trendline of the channel continues to act as resistance, while the lower boundary has provided support during recent dips.

This structure often shows a bearish bias until a breakout occurs. The token is also trading below its short-term moving averages, such as the 50-day and 20-day averages, which act as overhead resistance. 

Sellers will probably maintain control of the trend until the price rises above these levels. Volatility has been relatively muted. Bollinger Bands are slightly narrowing, which can happen when the market pauses before the next larger move.

Momentum indicators also lean negative. Buying strength is still restricted, as indicated by the relative strength index, which is below the 50 mark. However, the indicator is not yet in oversold territory, allowing for additional declines.

Within the channel, $110 to $115 is currently serving as a short-term support zone. If the price breaks below that range, it may move into the next demand zone.

On the upside, resistance sits around $125 to $130, where the upper channel trendline and short-term moving averages meet. A clear move above that range would be needed to shift momentum back in favor of buyers.

Bitcoin (BTC) failed to break the $72,000 resistance on Tuesday, as onchain data suggested that BTC was entering the most “challenging” phase of the cycle.

Key takeaways:

• Bitcoin price stays range-bound following another rejection at $72,000.

• Rising supply in loss suggests the most “psychologically challenging” phase of the bear market is here.

• Bitcoin must break resistance at $72,000 for a chance to end the downtrend.

Bitcoin faces the most frustrating phase of the cycle

Bitcoin is entering a period of “elevated uncertainty” where market participants display more hesitation than conviction, according to CryptoQuant analyst MorenoDV_.

“A combination of 3 key onchain metrics suggests that the market may be navigating one of the most psychologically challenging phases of the cycle,” MorenoDV_ said.

Related: Arthur Hayes says he’s waiting to buy Bitcoin until Fed eases policy

These include the Bitcoin bull-bear market cycle indicator, a metric that tracks phases of investor sentiment in the BTC market, which shows a bear market consolidation phase following the aggressive drawdown from cycle highs.

This is “a period that historically tends to frustrate both bulls and bears,” the analyst said.

The apparent demand further reinforces this picture. The chart above reveals that the spike in Bitcoin’s apparent demand in mid-February was short-lived, “with demand quickly slipping back into negative territory,” MorenoDV_ said.

The lack of sustained buying pressure indicates that market participants remain cautious and unwilling to aggressively accumulate at current levels.

Moreover, the Long-Term Holder SOPR is now below the key threshold of 1, a sign that even long-term investors are realizing losses.

“Historically, this phase tends to emerge in the later stages of bear markets, when prolonged uncertainty begins to erode even the strongest conviction. ”

Meanwhile, Bitcoin supply in loss is rising again, currently approaching the 40–45% range, up from 22% in mid-January.

Historically, such levels appeared during deep corrective phases, as seen in 2015, 2019, and 2022, reflecting growing market stress and capitulation among sellers.

The chart below shows that macro market bottoms are historically formed when supply in loss rises above 50%.

“Supply in loss is increasing again, indicating rising market stress,” CryptoQuant analyst Woominkyu said, adding:

“If historical patterns repeat, the current level may represent the early phase of a bear market rather than the final bottom.”

As Cointelegraph reported, analysts forecast Bitcoin extending its bear market into late 2026, with some predictions as low as $30,000.

Bitcoin’s key resistance remains $72,000

Bitcoin has made several unsuccessful attempts to rise above $72,000, a level that has suppressed the price since early March.

“Another rejection at the range high for the time being,” said analyst Daan Crypto Trades in an X post on Tuesday, referring to Bitcoin’s pause below $72,000 on Tuesday, adding:

“Still in the range and markets are in general very indecisive.”

An accompanying chart showed $72,000 was the key level to watch on BTC’s four-hour chart. Breaching this level could attract new buyers if the price breaks out of its range.

Fellow analyst BenCrypz said a clean breakout above $72,000 “could trigger stronger bullish momentum and open the path toward higher levels.”

“However, if this resistance holds again, BTC could rotate back toward the $69K mid-range or even revisit the $66K support zone.”