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

Image by metalandrew from Pixabay
Image by metalandrew from Pixabay

Key Takeaways:

  • Avalnache (AVAX) has recently seen significant increase in price and adoption.
  • The platform’s native token, AVAX, gained by 484% from July 20’s low.

NEW DELHI (CoinChapter.com) — Avalanche, a relatively new player in the Layer-1 blockchain scene, is seeing a significant price jump since July 20. AVAX, the platform’s native token, has jumped 484% from July 20’s low of $9.25 to August 23’s intraday high of $54.135.

Layer-one blockchains are a set of solutions implemented in blockchain’s basic protocol. Bitcoin and Ethereum are Layer-one blockchain examples. However, Bitcoin struggles with high transaction time while Ethereum suffers from high transaction costs, opening the market for more efficient Layer-one solutions.

An Avalanche Of Fundamentals

On August 18, Avalanche announced the launch of Avalanche Rush, a $180 million liquidity mining incentive program. In addition, the protocol partnered with Aave and Curve to expand its DeFi ecosystem with more apps and assets. Aave is a DeFi money market, which operates on the Ethereum blockchain. Curve serves an automated money market focused on stablecoins.

Avalanche reserved $27 million worth of AVAX tokens to fund the incentive program’s phase one. In phase one, the protocol would use AVAX as liquidity mining incentives for Aave and Curve users over three months. In addition, avalanche protocol aims to expand the DeFi ecosystem on its network with the Rush program.

The combination of Aave, Curve, and Avalanche will create really interesting synergies that DeFi users will be excited about.

From Avalanche’s announcement

Additionally, Avalanche released the Avalanche Bridge on July 29. In detail, the bridge facilitates the transfer of assets between the Avalanche and Ethereum networks.

Cross-chain transactions on Avalanche Bridge. Source: Avalanche Bridge on Avascan.info
Cross-chain transactions on Avalanche Bridge. Source: Avalanche Bridge on Avascan.info

In the 3.5 weeks since its launch, the bridge has transferred tokens worth more than $680 million. Moreover, the new bridge is nearly five times more efficient than the previous Avalanche-Ethereum Bridge.

Also Read: Cardano (ADA) anticipates major price correction on ‘overbought’ fears.

As Ethereum continues to struggle with high gas fees, with the DeFi ecosystem growing in size and value, more networks and apps might migrate to protocols like Avalanche.

Avalanche’s tokenomic structure includes a transaction fee-burning mechanism that helps regulate the circulating supply.

Amount of Avalanche transaction fees burned. Source: burnedavax.com
Amount of Avalanche transaction fees burned. Source: burnedavax.com

At the time of writing, the protocol has burned more than 174,685 AVAX tokens. Burning a token means sending it to an address that is inaccessible, taking it out of circulation. Avalanche has capped AVAX supply at 720 million, which means burning will decrease its supply over time. As demand for the token increases, a decreasing supply will ensure prices go up.

The DeFi protocol would also update its payment mechanism to Apricot phase 3 on August 24. The update will introduce the C-Chain dynamic fees algorithm, which targets a specific network utilization.

Price Charts

AVAX prices hit a low of $12.22 on August 3 before starting a bull run that saw its prices rise to August 23’s high of $54.13. As such, the Avalanche token rose 343% low to high in twenty days. Moreover, AVAX is trading above its 50-Day (Yellow) and 200-Day (Green) Moving Average trendlines, making it bullish in the short and long-term ranges.

AVAX's meteoric price jump on the daily chart. Source: AVAXUSD on Tradingview.com
AVAX’s meteoric price jump on the daily chart. Source: AVAXUSD on Tradingview.com

However, if the rally fails, bulls can find support at $44.569, which acted as the resistance between February 14 to August 23. A decline below immediate support would bring the support at $37.21 into play. Also, AVAX’s 26-Day (Red) Exponential MA and 200-Day MA form a support confluence at $24.129.

Also Read: Bitcoin hits $50,000 as PayPal extends crypto services to the UK.

On the other hand, AVAX is currently trying to break above resistance at $54.64. If bulls boost the price above it, the next target would be $56.47.

However, AVAX’s relative strength index may worry AVAX supporters. The RSI is at 95.97, well into the overbought region. When an asset’s RSI goes above 70, it indicates the asset is in the overbought area and primed for a trend reversal.

AVAX momentum indicators on the daily chart. Source: AVAXUSD on Tradingview.com
AVAX momentum indicators on the daily chart. Source: AVAXUSD on Tradingview.com

Yet, MACD for AVAX is bullish, as the token continues to chart positive bars on the MACD histogram. In detail, the MACD histogram plots the difference between the MACD line (difference of 12-Day and 26-Day EMA) and the MACD signal line (9-Day EMA of MACD). If the difference is positive, the trend is bullish.

On an optimistic note, the RSI trendline is now moving horizontally and may soon start going down.

AVAX was trading at $49.28, up 12.83% on the day.

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