In today’s analysis, we will delve into the recent price action of Avalanche (AVAX) and its on-chain activity to understand the underlying trends and potential future movements.
Bitcoin’s 22% correction from all-time highs has led AVAX to trade near the critical $30 support level, instilling fear among holders. Curious about the reasons behind this behavior? Let’s examine the details.
AVAX Is Trading Just Above a Critical Support Level
The chart below shows Avalanche’s price action in the 4-hour timeframe. The red lines highlight key support and resistance levels. Currently, the price is around $32. A decline below the $30 range could trigger a cascade of liquidations, leading to further price depreciation.
The $30.74 level, near the $30 mark, aligns with the 0.618 Fibonacci line and is a crucial support. Monitoring these levels will help investors and traders anticipate potential price movements.
Key resistance levels to watch are $33.26 (200 EMA), $34.06 (100 EMA), and $39.78. The EMA 100 and 200 in the 4-hour timeframe are significant as they can act as trendline resistance in the bearish trend.
Additionally, the Ichimoku Cloud is currently in a critical resistance zone. If AVAX breaks above the cloud, it could signal a price recovery.
Avalanche Analysis: Exploring Essential On-Chain Metrics
The average holding time of Avalanche has dropped to levels seen during the Q4 2022 bear market. This suggests that investors hold their coins for shorter periods, indicating increased trading activity and reduced confidence in holding AVAX long-term.
As the holding time decreases, it shows that more investors are trading AVAX rather than holding it. This increased activity can lead to higher volatility and price fluctuations.
The decrease in holding time reflects a bearish market sentiment. Investors are less confident in AVAX’s long-term potential, opting to trade in and out of positions more frequently.
At the moment of writing, more than 2 million small AVAX holders are at break-even or in losses. This situation could increase selling pressure as these investors might decide to sell to cut their losses, further driving the price down.
The majority of addresses hold between 0 – 1 AVAX and 1 – 10 AVAX, indicating a large number of small holders. The stability of larger holdings suggests that significant investors are maintaining their positions.
Many small holders at break-even or losses reflect a cautious market sentiment. These holders are more likely to sell under pressure, which could lead to increased volatility and further price declines.
The number of addresses holding AVAX for less than one month has decreased significantly. This means holders who bought AVAX recently are exiting the market and cutting their losses.
While fewer short-term traders can reduce immediate price volatility, it also means there is less buying support from this group. This can make the price more susceptible to downward pressure from other market segments.
Strategic Recommendations Amid Bitcoin’s Influence
- Bearish to Neutral Outlook: AVAX’s price struggles below the $30 support level, showing weakness after Bitcoin’s correction from all-time highs. This has led to fear among holders, with short-term investors exiting to cut losses.
- Bitcoin’s Influence: If Bitcoin continues its upward momentum and approaches its all-time highs, it could positively impact AVAX’s price.
- Conditional Support: Should Bitcoin fall further, AVAX might experience a notable mid-term price decline, potentially dropping below the critical $30 support level.
- Price Projections and Recommendations: In a bearish scenario, AVAX could fall to $25 if Bitcoin’s price declines. To reduce risk exposure, traders should wait for the price to drop below $30 before buying. The ideal buy range would be around $25-$27 for an optimal entry position. Setting a stop loss at $24 is advisable to manage potential downside risks and aim for a sell price of $40-50 to capitalize on the next upward wave.
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