Avalanche (AVAX) Shows Bullish Signs Despite Persistent Liquidity Outflows and Market Challenges

Avalanche (AVAX) shows promising signs of recovery, with a surge in on-chain activity; however, persistent liquidity challenges threaten its upward potential.

• AVAX price dropped 1.13% to $23.66, despite strong on-chain activity and rising investor participation.

• Liquidity outflows persisted as TVL dropped $50M and DEX Trading Volume fell from $216.5M to $130.3M.

Despite a slight drop in AVAX price to $23.66, strong on-chain activity hints at potential future gains amid liquidity challenges.

AVAX Records Major Activity Surge

There’s been a massive surge in activity on Avalanche in the past 24 hours. Per insights from Nansen, Active Addresses jumped 221% while Transaction Count rose 109%.

Source: Nansen

This surge indicates that more investors have been onboarded to the chain, with a notable number actively participating in transactions.

Further research indicates that 89.94% of these transactions were associated with OpenSea, a prominent non-fungible token (NFT) marketplace.

This aligns with a broader trend, as NFT applications have emerged as one of the best-performing sectors, boasting a remarkable 78.1% growth over the last month.

Such increases suggest that continued growth in NFT applications may play a crucial role in driving AVAX’s price upward.

Source: Artemis

The positive momentum is reflected in Avalanche’s fee generation, which increased from $19,500 on May 11th to $24,300 at press time.

While high usage signals robust blockchain activity, ongoing market conditions are equally vital for sustaining asset price growth.

However, COINOTAG’s findings indicate that not all signs are favorable, as liquidity outflows are still impacting AVAX.

Liquidity Outflow and Low Trading Activity Persist

Despite the uptick in on-chain activity, AVAX is grappling with liquidity outflow.

According to DeFiLlama, total value locked (TVL) across Avalanche protocols has decreased by 3.26%, from $1.519 billion to $1.469 billion, indicating a $50 million sell-off of AVAX assets.

Source: Artemis

At the same time, decentralized exchange (DEX) trading volume has decreased significantly from $216.5 million to $130.3 million, reflecting weaker demand across trading platforms.

For AVAX to maintain and build upon its upward trajectory, it is imperative that demand revitalizes on-chain, as well as across liquidity and trading channels.

Conclusion

In summary, while AVAX showcases promising on-chain activity possibly signaling future price gains, ongoing liquidity challenges and declining trading demand require careful monitoring. Stakeholders should remain vigilant as market dynamics evolve, ensuring they align their strategies accordingly.