Reasons Why Avalanche Bulls are Failing to lift AVAX from this Bearish Pattern
The Avalanche (AVAX) price is trading at $29.90 as of 1:.00 am EST, down 1% over the last 24 hours.
AVAX sank 40% between De. 24, 2023 and Jan. 24. Some analysts may argue that downside could be over for the token of the layer 1 protocol, as its current relative strength index (RSI) at 36 paints near oversold conditions.
$AVAX is already 45% down. A little bit more and you have a good entry for the bull run. If you want to be more safe just wait for the next buy signal!#Avalanche pic.twitter.com/eUW2GdMNQz
— Sam Mti (@MTI_Trading) January 23, 2024
However, AVAX has been stuck within the confines of a descending channel for the last 30 days even as GBTC-liked spot ETF sell-off continues to draw the market lower.
As such, Avalanche’s network activity, on-chain data and technical outlook confirms the downside might not be over for the AVAX.
Sell-side pressure keeps the bulls in check
AVAX’s price action has formed a series of lower highs and lower lows leading to the appearance of a descending parallel channel on the daily chart.
At the time of writing, the bulls were fighting to hold the support provided by the middle boundary of the declining channel at $29, embraced by the 100-day exponential moving average (EMA).
As such, losing this level would see AVAX drop further to seek solace from the lower boundary of the declining channel at $25.
Lower than that, the 200-day EMa at $23 and the $20 psychological level would provide the much-needed support for the layer 1 token. This would represent a 34% decline from the current price.
On the other hand, a daily candlestick close above the 100-day EMA would signal increased buying on the dips with the next line of resistance emerging from the channel’s upper boundary at $34.
Reclaiming the $35 level would confirm a bullish breakout from the bearish chart pattern with the bulls eyeing the $126 range high.
Avalanche’s declining TVL
The bearishness in the price of AVAX could be attributed to reduced demand, evidenced by declining on-chain activity.
One of the ways to measure the utility of a blockchain network is to track its activity. This can be determined by looking at the total value locked (TVL) — a measure of the U.S. dollar value of assets locked on a blockchain. It is an important indicator of investor and developer interest in a blockchain or decentralized application (dApp). TVL is similar to bank deposits for decentralized finance (DeFi) projects.
A closer look at Avalanche’s total value locked (TVL) reveals that demand has been declining since Dec. 24, 2023 when the price began turning down from its multi-year peak around $50.
Avalanche network’s TVL, USD. Source: DefiLlama
Solana’ TVL, reached its peak at $988 million on Dec.25, 2023, but experienced a 23% decline to $757.95 million on Jan. 23.
Decreasing funding rate
It is also important for traders to analyze whether retail investors using leverage have been influenced by the recent price action.
The latest data shows a funding rate below 0.01% per eight hours, equivalent to 0.2% per week, which is not significant for most traders.
AVAX OI-8-hour funding rate. Source: Coinglass
This is a stark contrast to the 1,68% per week charged to leverage longs (buyers) on Dec. 25, 2023, indicating that the excessive demand is no longer present.
Avalanche Foundation puts rules on plans to buy memecoins
Another thing that could affect Avakanche’s utility is the recent announcement by the Avalanche foundation that it was releasing new rules for coins released within its ecosystem, particularly memecoins.
Notably, the Avalanche Foundation has been keen on developing its own memecoin ecosystem. However, the new rules state that only memecoins native to the Avalanche blockchain will be considered for buying. This means that not all memecoins will be equal for the Avalanche Foundation and therefore developers will have to follow these set of rules before diving into the memecoin market.
The Avalanche Foundation recognizes the importance of fostering and supporting community initiatives on Avalanche, including the creativity and culture of community coins.
The Foundation has reserved a portion of the Culture Catalyst program to include community coins, doing so…— Avalanche 🔺 (@avax) January 23, 2024
To be eligible, meme coins must demonstrate fair launches that prevent unfair advantages and ensure community ownership. Projects should implement anti-sniping measures like whitelists to provide genuine community members with a fair chance at participation.
With the new guidelines and requirements, the Avalanche Foundation may discourage the development of projects that are not native to the ecosystem, reducing engagement on the platform.
Considering the pessimistic technical outlook, the dip in Solana’s TVL, the declining interest in leverage longs, and the latest memecoin guidelines, investor appetite for SOL seems to have plateaued.
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The Avalanche (AVAX) price is trading at $29.90 as of 1:.00 am EST, down 1% over the last 24 hours.
AVAX sank 40% between De. 24, 2023 and Jan. 24. Some analysts may argue that downside could be over for the token of the layer 1 protocol, as its current relative strength index (RSI) at 36 paints near oversold conditions.
$AVAX is already 45% down. A little bit more and you have a good entry for the bull run. If you want to be more safe just wait for the next buy signal!#Avalanche pic.twitter.com/eUW2GdMNQz
— Sam Mti (@MTI_Trading) January 23, 2024
However, AVAX has been stuck within the confines of a descending channel for the last 30 days even as GBTC-liked spot ETF sell-off continues to draw the market lower.
As such, Avalanche’s network activity, on-chain data and technical outlook confirms the downside might not be over for the AVAX.
Sell-side pressure keeps the bulls in check
AVAX’s price action has formed a series of lower highs and lower lows leading to the appearance of a descending parallel channel on the daily chart.
At the time of writing, the bulls were fighting to hold the support provided by the middle boundary of the declining channel at $29, embraced by the 100-day exponential moving average (EMA).
As such, losing this level would see AVAX drop further to seek solace from the lower boundary of the declining channel at $25.
Lower than that, the 200-day EMa at $23 and the $20 psychological level would provide the much-needed support for the layer 1 token. This would represent a 34% decline from the current price.
On the other hand, a daily candlestick close above the 100-day EMA would signal increased buying on the dips with the next line of resistance emerging from the channel’s upper boundary at $34.
Reclaiming the $35 level would confirm a bullish breakout from the bearish chart pattern with the bulls eyeing the $126 range high.
Avalanche’s declining TVL
The bearishness in the price of AVAX could be attributed to reduced demand, evidenced by declining on-chain activity.
One of the ways to measure the utility of a blockchain network is to track its activity. This can be determined by looking at the total value locked (TVL) — a measure of the U.S. dollar value of assets locked on a blockchain. It is an important indicator of investor and developer interest in a blockchain or decentralized application (dApp). TVL is similar to bank deposits for decentralized finance (DeFi) projects.
A closer look at Avalanche’s total value locked (TVL) reveals that demand has been declining since Dec. 24, 2023 when the price began turning down from its multi-year peak around $50.
Avalanche network’s TVL, USD. Source: DefiLlama
Solana’ TVL, reached its peak at $988 million on Dec.25, 2023, but experienced a 23% decline to $757.95 million on Jan. 23.
Decreasing funding rate
It is also important for traders to analyze whether retail investors using leverage have been influenced by the recent price action.
The latest data shows a funding rate below 0.01% per eight hours, equivalent to 0.2% per week, which is not significant for most traders.
AVAX OI-8-hour funding rate. Source: Coinglass
This is a stark contrast to the 1,68% per week charged to leverage longs (buyers) on Dec. 25, 2023, indicating that the excessive demand is no longer present.
Avalanche Foundation puts rules on plans to buy memecoins
Another thing that could affect Avakanche’s utility is the recent announcement by the Avalanche foundation that it was releasing new rules for coins released within its ecosystem, particularly memecoins.
Notably, the Avalanche Foundation has been keen on developing its own memecoin ecosystem. However, the new rules state that only memecoins native to the Avalanche blockchain will be considered for buying. This means that not all memecoins will be equal for the Avalanche Foundation and therefore developers will have to follow these set of rules before diving into the memecoin market.
The Avalanche Foundation recognizes the importance of fostering and supporting community initiatives on Avalanche, including the creativity and culture of community coins.
The Foundation has reserved a portion of the Culture Catalyst program to include community coins, doing so…— Avalanche 🔺 (@avax) January 23, 2024
To be eligible, meme coins must demonstrate fair launches that prevent unfair advantages and ensure community ownership. Projects should implement anti-sniping measures like whitelists to provide genuine community members with a fair chance at participation.
With the new guidelines and requirements, the Avalanche Foundation may discourage the development of projects that are not native to the ecosystem, reducing engagement on the platform.
Considering the pessimistic technical outlook, the dip in Solana’s TVL, the declining interest in leverage longs, and the latest memecoin guidelines, investor appetite for SOL seems to have plateaued.
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