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Avalanche (AVAX) price drops 45% in one month and data points to further downside

Avalanche (AVAX) price drops 45% in one month and data points to further downside

Avalanche (AVAX) is down 45% in 30 days as well as the total market capitalization of cryptocurrencies is down 29%.

Despite the recent slowdown, this decentralized application (dApp) platform remains a top contender in the Layer 1 and Layer 2 race and ranks high in terms of smart contract deposits and active addresses. Nevertheless, the weak coin price is still prompting investors to reconsider whether the network remains a “serious” competitor.

AVAX Token/USD on FTX. Source: TradingView

The brutal selloff on riskier assets caused AVAX to test the $14.80 support several times, while the current market cap is $4.8 billion. It’s also important to note that the network’s net worth locked (TVL) is an impressive $3.2 billion.

As a comparison, Solana (SOL) offers incredibly low network fees and holds a TVL of $2.1 billion. Nevertheless, the SOL token has a market cap of $12.9 billion, which is almost 3 times larger than Avalanche’s valuation at the $14.8 price level.

The TVL indicator is extremely relevant as it measures the amount deposited on the network’s smart contracts. If we use Polygon (MATIC), an Ethereum layer-2 solution, as a proxy, the network has a TVL of $1.8 billion while the token has a market capitalization of $3.5 billion.

In short, Avalanche offers huge discounts considering how much the market capitalization of similar networks is higher than their respective TVLs.

The total value locked increased, but the number of users declined

Avalanche’s primary decentralized application metric strengthened over the past 60 days as the network’s TVL reached 184 million AVAX tokens. This shows that even if the price of AVAX crashes, investors are not withdrawing tokens from its decentralized application.

Avalanche Networks Total Value Lock, AVAX. Source: Daphylama

In terms of AVAX tokens, the network’s TVL has effectively increased by 35% in two months. As a comparison, Ethereum’s TVL increased 10% in Ether terms, while the BNB chain suffered a 14% decrease over the same period.

To confirm whether the TVL growth in the avalanche is encouraging, traders should analyze dApp usage metrics. Some applications, such as games and marketplaces, do not require large deposits, so the metric is irrelevant in those cases.

Avalanche DAP 30-day data. Source: DappRadar

As shown by DappRadar, on June 21, the number of Avalanche network addresses interacting with decentralized applications dropped by 42% compared to the previous month. In comparison, BNB Chain suffered a 16% user loss, while Polygon lost 29%.

Price follows fundamentals, which have moved down

Although Avalanche’s TVL has outperformed competing dapp networks, the lack of network usage is worrisome. For example, Trader Joe’s 93,130 active addresses is smaller than Polygon’s flagship DeFi application, QuickSwap, which has 161,040 active users.

The above data suggests that an avalanche is in trouble and may explain why the price of AVAX is down 45% in 30 days. Investors will remain skeptical of the $14.80 support unless network usage metrics improve, particularly the number of active addresses in DeFi.

The views and opinions expressed here are solely those of Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.

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Avalanche (AVAX) price drops 45% in one month and data points to further downside

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