Avalanche (AVAX) is finally giving up some gains after a monstrous Summer rally. What are potential points of interest that could draw in bulls or bring in fresh bears?
First up on deck is Avalanche (AVAX), another layer-1 blockchain trying to take Ethereum’s crown as the top smart contract platform. And it’s native token AVAX was a beneficiary of this Summer’s rally in layer-1 assets as the markets were in looking for alternatives to Ethereum‘s ridiculous gas fees, as well as a way to gain exposure to the exploding DeFi space. AVAX/USDT went from a July low of 9.33 to topping out just under the 80.00 handle in September for over 700% gains before this month’s pullback.
With bitcoin back in the forefront and making gains (likely in anticipation of bitcoin ETFs potentially coming soon in the U.S.), many crypto assets have unusually taken a tumble at the same time. This is possibly a signal that traders are rotating capital to BTC in anticipation of an ETF induced pop in bitcoin. It’s also possible that recent U.S. dollar strength as U.S. bond yields continue to rise was a factor in the dip. All combined, this is likely the reason why we’ve seen the dip in AVAX/USDT from the 80.00 high to current trading levels around 50.00 – 55.00.
Whatever the case may be at the moment for the pullback, the dip doesn’t seem to be directly related to what’s going on with the Avalanche network, which in case you weren’t aware, is now a major player in the Decentralized Finance (DeFi) space. Besides sporting leveled up smart contract features like high transactions per second (roughly 4,500 TPS) & Ethereum compatibility, the total value locked into the Avalanche ecosystem rocketed from $250M in July 2021 to $5.7B in October (currently ranked among the major blockchains at 5th according to defillama.com/chains). And with over +100 projects being built on Avalanche, the adoption is only likely to grow.
So, it’s highly likely that there are plenty of longer-term bulls on AVAX watching this dip to add to their bags, and based on past support and resistance levels, the area between 40.00 – 50.00 probably has the best odds to draw in both technical and fundamental buyers. We’ll be watching that area for bullish reversal candlestick patterns and the oversold stochastic signal to turn higher before considering a longer-term long position in AVAX.
For the bears, after a big 30% drop from the highs and the solid longer-term uptrend in play, you may wanna keep it short-term with 40.00 as a potential max target. Unless we see a major change to Avalanche’s story (e.g., platform or project hack, increased negative DeFi regulation news, etc.) or a broad shift in global risk sentiment that boosts the U.S. dollar, the odds of a significant downside move remains very low at the moment.
What do you all think? Will AVAX get back into the previous consolidation area, and if so, will that draw in the longer-term bulls? Let me know in the comments section below!