What happened
AAVE rallied about 8% in a single session Monday, per Blockchain.News, but the move happened while aggregate open interest across perpetual futures dropped roughly 15%. That combination is the textbook signature of a short squeeze. Price rises because shorts are forced to buy back, not because new longs are stepping in with size. Fresh demand shows up as price and OI rising together. This wasn't that.
The rally ran directly into $104.17, the 200-day simple moving average, and stalled there. That level has acted as ceiling on every serious rally attempt this cycle. The token is now jammed against it with the fuel that drove the move already spent.
Why it matters
Short squeezes are mechanical, not fundamental. Once the covering finishes, the buyer of last resort disappears. If there's no organic bid waiting behind it, price fades back into the range it broke out of.
That's the setup here. Open interest didn't just fail to expand, it contracted hard. New longs would have added to OI as they built positions. Instead, the shorts got flushed and the tape went quiet at resistance. AAVE bulls now need real spot demand to show up in the next two or three sessions to convert this into something more than a squeeze. Absent that, the path of least resistance is back down.
Market impact
The three scenarios from here are clean.
Bull case: AAVE closes a daily candle above $108, clearing the SMA-200 with conviction and forcing sidelined bids to chase. Invalidation is a daily close back under $104. That's the only path that turns Monday's squeeze into a genuine trend shift.