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Breaking News: Major Win For Memecoins: SEC Affirms They Typically Do Not Qualify As Securities

Trader Warns Of “Capitulation Volume” And “Heavy Downside” Across DeFi

Tony "The Bull" Severino
Tony "The Bull" Severino
11 months ago
3 mins read
defi volume yfi uni eth lend aave

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The DeFi space rose to incredible heights all throughout 2020 but could have come to a roaring peak over the summer months. Assets like Yearn.Finance (YFI), Uniswap (UNI), or Aave (LEND) are all on the ropes, and related Ethereum-based decentralized finance tokens have fallen 60% across the board.

But despite the drawdown already, one sharp-eyed trader is warning that DeFi tokens lack “capitulation volume” that would signal a bottom is in. Here’s what to watch for and if that trader’s theory has validity.

Trader Calls Attention To Lack Of “Capitulation Volume” In Top DeFi Tokens

The total USD and Ethereum value locked in DeFi applications have a trajectory that matches Bitcoin’s parabolic climb into stardom in 2017.

Numbers grew from meager beginnings in early 2020 and quickly ballooned to over $11 billion TVL recently. The DeFi trend spilled into everything else, improving the health and valuations of the entire crypto space.

Ethereum benefited some of the most in the top ten, thanks to most of these tokens utilizing the blockchain, and requiring ETH gas fees to transact. The rest of the DeFi space went on such a tear, several tokens achieved four and five-digit ROI in the summer months alone.

Related Reading | Ethereum Leads DeFi Tokens On A 60% Average Fall From Summer Highs

Yearn.Finance (YFI) appeared out of nowhere and surged to four times the price per BTC. Uniswap also was minted out of thin air, and despite surviving an initial selloff due to free claimed UNI tokens, it has now dropped considerably.

MetaMask, an Ethereum wallet used to connect to these DeFi apps and DEX protocols, also saw a similar surge in user growth. Few projects in the decentralized finance space have done as well as Aave (LEND), however.

aave lend defi ethereum volume

LENDUSD Daily Lack Of Capitulation Volume, MACD Turning Down | Source: TradingView

Aave (LEND) Acts As Ideal Example Of Potential Danger Ahead In Decentralized Finance

Aave (LEND) is the perfect example of what a keen-eyed crypto trader says is a lack of “capitulation volume”. In the chart above, the parabolic curve has been lost and Aave has already plummeted 60% or more, yet volume is very telling of what could soon come.

Volume is a useful indicator for analysis because it can confirm trend changes, breakouts, and help to spot early positions from smart money. Aside from the breakout into an uptrend in LENDUSD price charts, Aave trading volume has been in steady decline since 2018.

The Ethereum-built DeFi tokens have already fallen 60% to support but could have a lot further to dive if and when selling volume kicks into high gear. Losing the current support level could do the trick.

Combined with a breakdown of the parabolic advance, and an impending bearish crossover of the MACD after such bullish momentum, Aave is potentially ready for capitulation soon.

lendusd crypto defi

LENDUSD Daily Lack Of Capitulation Volume, MACD Turning Down | Source: TradingView

What exactly does this mean? Well, another look at the same chart, shows an inverse head and shoulders that sent Aave rallying to recent highs. Resistance was never retested as support, and the DeFi token went soaring. A throwback to support to confirm the pattern would be bullish but could result in as much as a 90% fall from here.

Related Reading | How Uniswap & DeFi Drove Ethereum Wallet MetaMask To 1M Users

Like other altcoins that broke down after the crypto bubble, parabolic advances are often followed by as much as an 80% or more drawdown. Bitcoin’s was 84%, Ethereum dropped much more. How far will DeFi tokens fall?

Featured image from Deposit Photos, Charts from TradingView
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Tony "The Bull" Severino
Tony "The Bull" Severino

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Read more

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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