Short seller pitfalls: AAVE rebound stops, incurring a loss of $24,000

A new address’s short position this morning ended with a quick stop-loss. According to on-chain monitoring data, this address opened a short position of 2,901.83 AAVE and 440,308,509 kPEPE on January 6th, both of which were stopped out, resulting in a total loss of $24,000. Behind this event reflects AAVE’s recent strong rebound and the shift in market sentiment.

Closing Details: The Behind Story of Quick Stop-Loss

Based on Hyperinsight’s monitoring, the new address’s short positions opened this morning were forced to close within just a few hours. The combination of 2,901.83 AAVE and 440,308,509 kPEPE shorts quickly lost up to $24,000 during the rebound, ultimately choosing to cut losses. Such rapid stop-loss operations usually indicate that the short seller set tight stop-loss levels or that the rebound exceeded expectations.

How Strong is AAVE’s Rebound?

From recent price performance, AAVE is indeed showing strength:

Especially the 14.85% increase over 7 days is enough to break through many aggressive shorts. PEPE has also shown some performance recently, and this new address is shorting two tokens simultaneously, indicating a misjudgment of the overall market direction.

Market Background: From Bearish to Bullish Shift

This failed short position incident just reflects the recent change in market sentiment. According to the latest news, AAVE’s fundamentals remain strong—AAVE deposits on the Ethereum mainnet have hit a new all-time high, surpassing 3 million tokens, with active loans occupying a leading position, approaching half of the DeFi lending market.

More importantly, market participants are turning optimistic. Several traders have expressed that they are long AAVE or holding it as a core position. This shift in sentiment often amplifies the rebound. In this context, short sellers face not only a price rebound but also a confrontation with the overall market mood.

Rising Risks of Shorting

This $24,000 loss case reminds us of several realities:

• The Suddenness of Rebound: Under the dual support of strong fundamentals and improved sentiment, rebounds can come faster and stronger than expected.
• The Necessity of Stop-Loss: This address chose to cut losses quickly, avoiding larger losses, which was the right decision.
• The Power of Market Consensus: When multiple participants are bullish on an asset, the risks of shorting increase significantly.

Summary

This closing event is just a small episode in the market, but it reflects AAVE’s recent strength and the shift in market sentiment. From a fundamental perspective, AAVE’s leading position in lending remains solid; technically, the 14.85% 7-day increase already indicates strong rebound momentum. For short sellers, this may serve as a reminder—that when market consensus turns bullish, the risks of short positions rise rapidly. For longs, this combination of strong fundamentals and positive sentiment may warrant continued attention.