Over the past month, a significant dip in network activity has been observed in the Avalanche blockchain, coinciding with a decline in the value of its native token, AVAX. Despite the bearish trend, there’s a strong potential for a trend reversal. The timing of these occurrences is noteworthy, as it comes just before the impending token unlock of the blockchain, a situation that might raise concerns for investors.
The Downward Trend in Key Avalanche Metrics
A close examination of Avalanche’s key statistics indicates a downward trajectory. Artemis’ data reveal that network activity has been on a decline, with daily active addresses following suit over the last 30 days. A similar trend was observed in daily transactions until August 12, after which there was a slight increase. The value of the blockchain also saw a steep fall, as reflected in its Total Value Locked (TVL).
AVAX’s revenue and fees also experienced a drop, although there was a brief spike on August 17. As of the time of writing, AVAX had lost over 14% of its value in the past week and was trading at $10.68, with a market capitalization of over $3.6 billion, according to CoinMarketCap.
Impending Token Unlock: A Potential Game-Changer?
A recent tweet by Token Unlocks revealed that AVAX is slated to unlock 2.77% of its total supply in the next eight days, equivalent to a whopping $102 million. Ordinarily, an increase in circulating supply often leads to a decrease in asset value. However, this hasn’t been the case with AVAX in the past. Interestingly, AVAX’s price increased during its previous unlocks. But this time, with the prevalent bearish market sentiment, a price drop seems more likely.
Hope for a Trend Reversal?
Despite the bearish market sentiment, there are indications of a potential trend reversal. The Open Interest of AVAX declined as its price dropped, a phenomenon that often signifies the end of a price trend. Additionally, the Relative Strength Index (RSI) of Avalanche was in the oversold zone, suggesting that buying pressure could increase soon.
While the Money Flow Index (MFI) showed a slight increase, the Moving Average Convergence Divergence (MACD) signaled a significant bearish edge in the market, indicating a complex scenario.
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