Key Insights:
- Aave DAO proposes buybacks, governance changes, and liquidity improvements to boost AAVE’s economy.
- Analysts predict AAVE will reach $628, which indicates a market value increase of 192% above its present position.
- AAVEUSD technical indicators point to bullish recovery as buying pressure surges.
AAVE price surged over 7% on Tuesday following the announcement of a new governance proposal aimed at improving the token’s financial structure. The proposal includes a structured buyback program, redistribution of protocol revenue, and upgrades to liquidity management. Analysts suggest that AAVE could continue its upward trend, with predictions pointing to a potential price target of $628.
Aave Governance Proposal Introduces Buyback and Liquidity Enhancements
The Aave DAO has recently presented a governance proposal to improve the AAVE token economy. The announcement includes the buyback plan, LEND token migration cessation, and modifications to the liquidity regulation.
These measures are aimed at providing financial stability and further development of the protocol.
One of the measures is the plan to initiate the weekly AAVE buyback program. Aave Finance Committee, which will be a newly introduced entity, will oversee it, with a funding of $1 million in the first week only. These will also be responsible for liquidity management and any changes that may occur depending on the financial state of the protocol. This will be done by conducting a Snapshot vote on the proposal before final implementation is done.
Redistribution of Protocol Revenue and Anti-GHO Token Introduction
Another component of the governance plan is a new revenue distribution mechanism. Previous strategies will not be deployed as now rewards will assigned to multiple assets such as wETH, USDC, USDT, and AAVE. This is beneficial since it ensures that stakers are directly rewarded from the earnings of the protocol.
Furthermore, the proposal of staking and reward mechanism is accompanied by a non-swapable Anti-GHO token that is based on the ERC20 standard. This would be passed to AAVE and StkBPT stakers, replacing the existing GHO discount scheme. The change is meant to offer an equilibrium in the reward distribution in the ecosystem for its users.
Additionally, they made changes pertinent to the governance proposal, which includes the discontinuation of the LEND token migration system. The LEND token was used until 2020 for the governance of Aave before transitioning to AAVE. The proposal aims at halting the LEND migration contract which retains possession of 320,000 AAVE tokens which translates to around $65 million.
Selling off the LEND contract is also aimed at simplifying the governance structure and strengthening the protocol’s financial standing. If passed, this would signal the final phase of the transition from LEND to AAVE that has been occurring for the past few years.
Analysts Predict AAVE Price Surge to $628
Following the announcement of the new governance proposal, AAVE’s price rebounded, gaining over 7% on Tuesday. Trading volume surged by more than 84%, reaching approximately $620 million. Despite a 21% decline in the past month, the token appears to be regaining momentum.
Technical indicators suggest that AAVE is trading within an expanding channel while maintaining an ascending trend line as support. Analysts point to a potential resistance level at $227, followed by $280. If the bullish trend continues, the price could break past these levels and move toward $300.
However, a bearish trend emerges due to price positions below Ichimoku Cloud. Despite this, an upward entry into the cloud currently suggests potential movement towards positive price trends. Another evidence of bullish momentum is the shorter EMA crossing above the longer EMA in the EMA crossover signal.
Moreover, the buying pressure remains at a moderate level according to the Relative Strength Index reading at 43.32. If there is a rise buying power, a bullish recovery maybe anticipated due to increased investor confidence.
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational ideas only, and they do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
Olivia Stephanie is a FinTech enthusiast with a keen understanding of financial markets. Her passion for economics and finance has led her to explore emerging blockchain technology and cryptocurrency markets.