AAVE price slides 15% but buyers scoop the dip amid tokenized yield market boom

AAVE price slid more than 15% in four days but buyers quickly scooped the dip, setting up a potential 20% leg up as Pendle’s booming tokenized yield markets drive renewed interest in the Aave protocol.

Aave (AAVE) price dipped over 15% in just four days, from $283 peak on May 27 to $240 intraday low today. However, buyers rushed to scoop the dip, driving AAVE price above $254 intraday peak though it has since retraced slightly to $251.

The rebound comes amid a period of heightened activity on the Aave protocol, particularly related to the growth of tokenized yield markets in collaboration with Pendle (PENDL) and Ethena (ENA).

On May 27, support for three new collateral types—eUSDe, July-maturity PT-USDe, and August-maturity PT-eUSDe—was added to Aave, bringing an aggregate initial market size of approximately $700 million. The following day, on May 28, Pendle launched two of these markets with supply caps of $100 million for PT-eUSDe and $40 million for PT-USDe. Both caps were fully filled within hours, prompting Pendle to raise the limits on May 29 to $200 million and $80 million, respectively. These higher caps were again filled rapidly, reflecting strong demand for tokenized yield instruments on Aave.

PT-USDe and PT-eUSDe are principal tokens that represent a fixed-yield claim on underlying assets locked within the Pendle protocol. These tokens enable users to trade and monetize future yield by separating the principal and yield components of their assets. To be clear, Ethena’s PTs were added to Aave a month ago, but the support for new collateral types eUSDe, July PT-USDe, and Aug PT-eUSDe were added to Aave on May 27.

While these PT tokens don’t directly affect the price of AAVE, they show growing use and demand for Aave’s DeFi platform, which could help the token’s value in the long run. As more users supply assets to trade these principal tokens, Aave’s TVL increases. As of May 20, Aave accounted for 20% of all TVL in the DeFi sector, according to data shared by the protocol. Growth in TVL can eventually benefit AAVE holders for its role in governance and generally as greater adoption tends to boost network value and investor confidence.

Meanwhile, AAVE price is potentially eyeing a 12%+ move from the current level of $251 as it targets resistance at $283, with the recent dip likely serving as a healthy bull retracement and a higher low within the broader uptrend.

Once $283 immediate resistance is cleared, the next major level to watch is the psychological $300 mark, which also acted as strong support during December rallies, which would represent a nearly 20% increase from the current price.