AAVE shot up 8% in a single day, but the move looks more like a short squeeze than a genuine trend reversal. Open interest collapsed by 15% as the price climbed, and the token is now jammed against the $104.17 SMA-200 resistance level.
Short squeeze dynamics
When a price rises sharply while open interest falls, it usually means short sellers are being forced to cover their positions. That appears to be what happened with AAVE. The 8% jump came on a day when the number of outstanding futures contracts dropped by 15%, a classic sign that bears are bailing out rather than new bulls piling in. Without fresh long demand, the rally lacks a solid foundation.
Resistance at SMA-200
The token is now testing the 200-day simple moving average at $104.17. That level has acted as a ceiling before, and it's doing so again. For the move to turn into a sustained uptrend, AAVE needs to break above that line with conviction. So far it hasn't. The price is stuck right at it, and the declining open interest suggests the squeeze may be losing steam.
Traders are watching whether the token can push through the SMA-200 in the coming sessions. If it fails, the price could slide back toward recent lows. If it breaks, the short squeeze could extend, but the lack of new long interest makes that outcome less likely. For now, the data points to a temporary event rather than a change in direction.
