Avalanche’s 484% price rally brings forth extreme AVAX sell-off risk

Avalanche’s 484% price rally brings forth extreme AVAX sell-off risk
“sell-off” by mikecohen1872 is licensed under CC BY 2.0
  • AVAX/USD rallied into overbought territory with RSI readings close to 100.
  • A slew of technical and fundamental factors fuelled AVAX’s 484% run
  • Avalanche’s native token risks dropping significantly

JAIPUR (Coinchapter.com) – After an explosive 484% rally, Ethereum competitor Avalanche’s AVAX token risks correcting significantly.

The AVAX/USD pair’s face-melting run from $9.3 to $53.6 pushed it heavily into the overbought territory, thereby creating an ideal setup for sellers to book profits aggressively. A similar scenario took shape in February earlier this year when prices soared to $60, pumping relative strength index (RSI) numbers to 97.17.

Avalanche's AVAX trends in overbought territory
Avalanche’s AVAX trends in overbought territory. Source: AVAXUSD on TradingView.com

What followed later was a 63% correction to $22. The token awaits a similar fate even with many factors that dismiss the end of bullish sentiment.

What Caused Avalanche’s Token To Fly?

Fundamentals

Avalanche announced Avalanche Rush, a $180 million liquidity mining incentive program, on Aug 18, collaborating with Aave and Curve Finance.

Related: AVAX soars as Avalanche announces Aave and Curve Finance integration to a $180M project.

Both are the leading protocols in the Ethereum DeFi ecosystem as per usage and total value locked (TVL) numbers. In addition, Aave is a decentralized borrowing and lending platform, while Curve Finance lets users tap liquidity from a liquidity pool for efficient stablecoin trading.

With Aave and Curve Finance launching on Avalanche, users would receive liquidity mining incentives to the tune of $20M AVAX (for Aave users) and $7M AVAX (for Curve users) over three months for Phase 1. 

Plus, the Avalanche Contract-Chain (c-chain) went live on the global cryptocurrency exchange OKCoin. It would allow users to transfer AVAX to c-chain integrated wallets seamlessly.

The AVAX/USD pair also received great liquidity infusion on the back of the impending Apricot Phase Three network upgrade. The same would cause a 66% drop in transaction fees upon activation.

While fundamentals did cause buyers to load up on Avalanche’s token, a bullish technical setup also paved the way for soaring AVAX prices.

Golden Cross

Daytraders anticipated substantial gains ahead for the AVAX/USD pair in light of a golden cross formation on Friday. The bullish setup involves the 50-day moving average (50-day MA) crossing over the 200-day moving average (200-day MA).

Related: Avalanche hits record high following 484% AVAX rally; what’s driving it upward?

Golden crosses are considered bullish indicators and an opportunity to place buy bets for upcoming price runs. AVAX formed a golden cross when the token’s upward move was at its prime. However, the technical event retained bullish confidence, causing AVAX/USD spot rates to almost reclaim the previous all-time high.

AVAX Price Levels To Watch

Sellers entered AVAX markets during Tuesday’s early morning London session and pulled down prices to $48.26. As a result, the AVAX/USD pair could fall to the $33-$37 range if the bearish pressure continues.

AVAX risks dropping to the $20-$25 range
AVAX risks dropping to the $20-$25 range. Source: AVAXUSDT on TradingView.com

A further push below the said range would cause prices to drop to the $20-$25 range.

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