Avalanche down by nearly 25% as Terra faces tax evasion charges — what’s the connection?

Key Takeaways:

  • Avalanche's native token prices might be springing a bear trap for traders.
  • Terra founder Do Kwon facing tax evasion charges in South Korea.
Avalanche's AVAX token is down by nearly 25% this week. Image from Stockvault and Cryptologos
Avalanche’s AVAX token is down by nearly 25% this week. Image from Stockvault and Cryptologos

NEW DELHI (CoinChapter.com) — Avalanche’s native token AVAX prices fell nearly 25% in the week beginning May 16, going from Monday’s high of $36.5 to an intraday low of $28.3 on May 19.

The AVAX token has been trending downwards over the last thirty days, including a massive 30% drop on May 11 last week during the UST/LUNA crash-induced market rout. Since then, AVAX prices have been consolidating between $27 and $36.5.

Avalanche prices have been in a downtrend over the past 30 days. Source: CoinMarketCap.com
Avalanche prices have been in a downtrend over the past 30 days. Source: CoinMarketCap.com

Avalanche prices have lost more than 66% of their value over 30 days, pushing AVAX to levels last seen in Aug 2021. AVAX prices rebounded last weekend, but the jump seems likely to be a bear trap rather than an uptrend.

In detail, a bear trap occurs when the price action of an asset gives a false signal of a bullish trend reversal.

AVAX Price Charts

Meanwhile, AVAX’s relative strength index remains in the oversold region, with a value of 27.69 on the daily charts.

RSI measures the magnitude of recent price changes to analyze overbought or oversold conditions. An oversold RSI indicates a bullish trend reversal is on the cards. With AVAX prices at oversold levels, investors who rely on RSI would likely move in to buy the dip and trigger a rally.

Also Read: Fantom (FTM) price could rally by over 700% in Q3/2022 — here's why.

On the other hand, the AVAX token remains inside the trendlines of the Bollinger Bands indicator. In detail, Bollinger bands consist of a simple moving average (middle band) and an upper and lower band. The bands are two standard deviations from the middle band, following the three-sigma rule.

AVAXUSD daily chart with RSI and Bollinger Bands. Source: Tradingview.com
AVAXUSD daily chart with RSI and Bollinger Bands. Source: Tradingview.com

But, given the market’s bearish sentiment, it is unlikely AVAX would stage an uptrend. The oversold RSI might lure less-experienced traders into the Avalanche’s bear trap.

If traders move in, AVAX prices might jump above immediate resistance near $31 before challenging resistance at $35, near its consolidation channel. Moreover, a sustained uptrend might see Avalanche prices rise to $44 before corrections pare AVAX gains.

Conversely, a sell-off might result in AVAX prices testing immediate support near $26. If Avalanche breaks below immediate support, AVAX prices might fall to support near $23, which previously supported AVAX price action between Feb 22, 2021, and Apr 26, 2021.

Finally, a marketwide sell-off could see AVAX reach $19.5 support.

Terra Founder Do Kwon Facing Tax Evasion Charges

South Korea’s National Tax Service has ordered Do Kwon, the founder of Terra, to pay nearly $78 million in taxes. In addition, as per a local news outlet, the country’s tax regulator found Terraform Labs and The Ancore Company, Terra’s parent companies, guilty of tax evasion.

Also Read: Avalanche's incredible network growth does little in limiting AVAX price's 40% crash risks.

The South Korean tax authorities believe Terraform Labs sent LUNA from its Singapore entity to the Luna Financial Guard to avoid taxes. Furthermore, the tax watchdogs might impose an additional tax on LFG’s Bitcoin holdings.

The news might come as a bearish cue for AVAX, as the LFG holds nearly 1,973,554 AVAX tokens, Bitcoin (BTC), along with other cryptocurrencies, in its bid to secure UST’s peg to the dollar in case of a collapse.

While that plan failed spectacularly, LFG might still sell the remaining tokens to recoup some losses or use them to pay the $78 million fine. It has already sold most of its BTC holdings, which currently stand at 313 BTC from the original 80,394 BTC.

At the time of writing, AVAX was trading at $28.8, down 2.45% on the day.

close
Avalanche, Avalanche down by nearly 25% as Terra faces tax evasion charges — what’s the connection?

Subscribe Today
for our Weekly Newsletter

Free Weekly Crypto News without the spam.

Related Articles

Our Partners

SwapCoin.com RapidCoin.com ChangeNOW.com Paybis.com