Akash Girimath
FXStreet
AVAX price has been dragging its feet since August 25. Although there were a few upticks in volatility, Avalanche bulls seem to be out of the picture now. AVAX is currently hovering above a fat support area and shows signs of bouncing off of it and reaching record highs.
There are three reasons why this move is likely to occur; technicals, fundamentals and tokenomics.
AVAX price has seen a 2,513% return in 2021 as it rallied from $3.02 to an all-time high of $78.86. This massive ascent is a result of the right conditions with perfect fundamentals. Touching more on the current market phase and the technicals can help identify if AVAX is ready for another leg up.
Altcoins, especially Layer 1 coins like SOL, LUNA, FTM and others, have been exploding. AVAX is also one of these coins, and it too set up a new all-time high on September 24. Since then, Avalanche has corrected, setting up three higher lows and two lower highs. Connecting these swing points using trend lines results in the formation of an ambiguous technical formation known as a symmetrical triangle.
Since this setup has no directional bias, a breakout could happen in either direction. Investors need to keep their eyes peeled, therefore, as AVAX gets squeezed with each passing day. The further it travels toward the triangle’s apex, the more volatile the eventual breakout is likely to be.
The target for this formation can be obtained by adding the distance between the first swing high and low to the breakout point. Since the overall market, including Bitcoin, is in a bullish state, investors can expect AVAX price to be biased to breaching the upper trend line at $70.40.
A decisive daily candlestick close above this barrier will theoretically confirm a breakout and forecast a 40% ascent to $100.
Supporting this move higher is the daily demand zone, ranging from $46.97 to $56.50. After the Momentum Reversal Indicator (MRI) flashed a red ‘one’ sell signal, AVAX dropped 10% and came extremely close to retesting the mentioned support area, but so far it has not. Going forward, therefore, investors can expect the buying pressure to receive an extra oomph if AVAX dips into this zone.
The resulting bullish momentum will propel AVAX 78% higher to reach its intended target at $100. In some cases, the AVAX price could extend further to retest the 161.8% trend-based Fibonacci extension level at $112.56.
If the buying pressure persists, 261.8% level at $162 will be where Avalanche bulls set up a new high.
AVAX/USDT 1-day chart
Fundamentals for Avalanche are programmed to be bullish
While AVAX’s short-term technicals are hinting at an explosive move higher, the fundamentals are suggesting that the long-term outlook for Avalanche is brighter. Avalanche takes a cue from Bitcoin and hard caps its total supply at $720 million. Unlike many projects, however, Avalanche has allocated half of its supply toward staking rewards while keeping the remaining supply toward community, developers, rewards, and so on.
Interestingly, as time progresses, AVAX supply will continue to reduce by an inherent burn mechanism that the project leverages. Avalanche burns 100% of the fees, which effectively reduces the total supply of tokens.
Etheruem introduced a similar mechanism to its ecosystem by burning a portion of the fees via EIP-1559. This creates a negative supply shock, which will add a tailwind to the market value of tokens. Therefore, AVAX price will increase in value over a larger time frame.
AVAX token distribution chart
Staking rewards reduce the remainder of the sell-side pressure
Burning tokens reduces the inflation rate and decreases the supply of tokens circulating in the market. Avalanche took this one step further, however, by allocating the 360 million AVAX tokens as rewards for stakers.
The Avalanche Hub states,
360 Million AVAX were minted at launch, whilst the other 360 Million will be used as Staking rewards released over decades.
AVAX token distribution chart
On October 29, roughly $15.3 million worth of AVAX tokens are staked and are yielding a 9.53% reward to the stakers. It ranks sixth in terms of value staked just after Polkadot and Terra. These statistics suggest that long-term investors are not planning to sell their tokens anytime soon, effectively reducing potential selling pressure.
AVAX staking stats chart
The outlook for AVAX price looks bright, be it from a short-term or a long-term perspective. If Avalanche bulls fail to keep the token above the $46.97 to $56.50 demand zone, however, that forecast will alter and suggest weakness among holders.
A decisive daily close below $46.97 will confirm the start of the symmetrical triangle’s bearish thesis and crash AVAX price by 40% to $32.23. In some cases, AVAX could extend to the $25.09 support floor, at that point, however, it may attempt a comeback.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Join Telegram
Join Telegram
Bitcoin price has maintained an uptrend since early 2023. Although the bulls fumbled in September, they are back on track. While a further ascent is likely, BTC needs tailwinds, which may or may not come in the form of an ETF approval.
Litecoin address activity and whale transactions hit levels previously seen in June 2023. Dormant LTC tokens are on the move, indicating that a higher volume of Litecoins are circulating among traders.
NEO, an open-source blockchain platform announced the creation of a sidechain that resists Maximum Extractable Value (MEV) attacks and is compatible with Ethereum.
Bitcoin (BTC) price rallied nearly 18% this week as market participants seem to be pricing in an upcoming approval of a BTC spot Exchange Traded Fund (ETF) in the United States.
Bitcoin (BTC) price has maintained an uptrend since early 2023. Although the bulls fumbled in September, they are back on track. While a further ascent is likely, BTC needs tailwinds, which may or may not come in the form of an ETF approval. On the contrary, the recent rally seems toppy and is likely to trigger a correction.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Opinions expressed at FXStreet are those of the individual authors and do not necessarily represent the opinion of FXStreet or its management. FXStreet has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and omissions may occur. Any opinions, news, research, analyses, prices or other information contained on this website, by FXStreet, its employees, clients or contributors, is provided as general market commentary and does not constitute investment advice. FXStreet will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
