Avalanche price has not been left behind in this year’s crypto sell-off. The AVAX coin has crashed by more than 80% this year, making it one of the worst-performing large-cap coins in the industry. Its market cap has collapsed to about $5 billion, making it the 17th biggest coin this year.

Why has AVAX collapsed?

Avalanche is one of the biggest layer-1 networks in the world. It is a well-known Ethereum rival that is known for its speed and low transaction costs. According to its website, it has a transaction finality of less than 2 seconds. It can handle thousands of transactions per second (TPS). In addition, Avalanche runs thousands of nodes globally.

Like Ethereum, Avalanche is widely used to build decentralized projects in finance, NFTs, and the metaverse industries. According to DeFi Llama, Avalanche’s applications have a total value locked (TVL) of more than $1.57 billion, making it one of the biggest players in the industry.

Avalanche has been used to build some of the most popular DeFi apps in the industry like Aave, Benqi, Trader Joe, and Platypus Finance. However, the volume of assets in Avalanche has crashed from over $11 billion to the current $1.57 billion. At the same time, the role of Aave in its network has grown rapidly. 

While Avalanche has over 200 projects, Aave has a market dominance of 45.7%. This is one of the top reasons why the AVAX price crashed in 2022. Another reason is that Avalanche has no major market share in key industries like NFT. Some of the leaders in NFTs are platforms like Ethereum, Flow, and Immutable X.

AVAX price has collapsed because of the falling global demand amid rising interest rates in the United States. 

Avalanche price prediction

So, is it safe to buy Avalanche? The daily chart shows that the AVAX price has been in a freefall in the past few months. In this period, it has managed to move below the 25-day and 50-day volume-weighted moving averages (VWMA).

A closer look shows that the coin has formed what looks like a head and shoulders pattern. In price action analysis, this pattern is usually a bearish sign. 

Therefore, there is a likelihood that the coin will have a bearish breakout soon. If this happens, the next reference level to watch will be at $13.8. An opposite situation is that the coin has formed a falling wedge pattern, meaning that it could soon bounce back.

• Avalanche is trading at the breakout zone after correcting in a bear market

• The Fed’s policy move on Wednesday will determine the price move

• Watch for the close of the daily candlestick for a possible reversal or bear continuation

Most cryptocurrencies are correcting after the recent gains. Profit taking and Fed’s policy action on Wednesday is playing a role. Cryptocurrencies like Avalanche AVAX/USD had previously breached key levels. They remain on the watch list should the Fed hold a soft stance regarding policy tightening.

AVAX is trading at $20.12. The level is close to or at the support of $20.95. AVAX traded and consolidated at $26 as the price pushed through the $20.95 resistance. At the current price, the token is seemingly looking to crash back into the consolidation zone. Nonetheless, it can’t be confirmed yet that AVAX has slipped below the $20.95 support. We need the close of the daily candlestick for confirmation.

AVAX slightly slips below the breakout support

Source – TradingView

Technically, the Avalanche token is bearish at or slightly below the $20.95 support. The short-term moving averages have moved above price and could add bear weakness. The MACD indicator is also about to close below the moving average in a bear market.

While bear pressure remains on AVAX, we cannot confirm a break below the $20.95. Investors should watch for the close of the daily candlestick. It could be a false breakout if the candlestick closes above the support. In that case, a buy signal would be generated. That would, of course, be subject to the prevailing crypto sentiment.

If AVAX closes below the $20.95 support, with a bear crypto sentiment, weakness will continue. The next potential support for the token is $16.

Summary

AVAX is yet to confirm a bearish momentum despite breaking slightly below the $20.95 support. The token could reverse if the daily candlestick closes above the support.