Avalanche (AVAX) May Face Key Support Challenges Amid Signs of Growing Demand and On-Chain Activity

• Avalanche (AVAX) is facing a critical support test at $35, amidst increasing on-chain activity and fluctuating market dynamics.

• New data indicates a rebound in developer engagement and user activity on the Avalanche network, hinting at potential future growth.

• According to IntoTheBlock, “Despite recent price stagnation, the rise in unique addresses suggests an underlying demand for AVAX.”

Avalanche (AVAX) is testing crucial support levels amid growing on-chain activity, signaling potential opportunities for traders and investors.

Avalanche’s Price Stability at Critical Support Levels

Avalanche [AVAX] has managed to maintain its position at the $35 support zone over the latest reporting period. A recent analysis indicates that a liquidation cluster exists just beneath this critical level, specifically around $34.72, posing a risk of further downward pressure on the price should this support fail. Analysts caution that if AVAX cannot uphold this support, a drop to approximately $28.5 could follow, marking a pivotal moment for traders.

Market Correlation and Affects on AVAX

The correlation analysis from IntoTheBlock indicates a noteworthy relationship between AVAX and Ethereum (ETH), both of which have faced similar challenges in capturing bullish momentum recently. The implications of this correlation suggest that movements in the broader market, particularly related to ETH, could significantly influence AVAX’s price action.

Encouraging Development and On-Chain Activity

Source: DefiLlama

Since the peak in 2021, Avalanche has seen fluctuations in developer activity, but the latest reports show a notable resurgence in developers and their commitments. Although there has been a decline since June 2024, metrics indicate numbers remain robust compared to the lows of late 2021, which suggests a potentially bullish outlook for the project.

Source: DefiLlama

The total value locked (TVL) in Avalanche protocols has experienced a substantial decline from its all-time high of $11.44 billion. Despite recent increases in transaction volume, figures remain below late 2023 and 2022 highs. However, a surge in capital inflows two weeks ago signals optimism, particularly as the DeFi ecosystem appears to be stabilizing, laying a foundation for future growth.

Source: IntoTheBlock

Higher numbers of new and active addresses in the Avalanche ecosystem highlight a potential uptick in demand for AVAX tokens. This is corroborated by IntoTheBlock’s data showing that non-zero balance addresses in the Avalanche network catapulted from 3.42 million in May 2023 to 9.64 million in January, indicating a significant increase in user engagement.

Is your portfolio green? Check the Avalanche Profit Calculator.

In summary, on-chain metrics are reflecting steady growth in various domains. While the downturn in development activity remains a potential concern, it is outweighed by positive user growth and capital inflow trends, which could lead to a shift for AVAX in the near future.

Conclusion

As Avalanche navigates these pivotal moments, key support levels and on-chain metrics will be crucial in determining the asset’s trajectory. Investors should monitor these fluctuations closely, as they offer insights into potential market developments without resorting to speculation. Overall, the combination of stable network activity and growing interest may signal brighter prospects for AVAX in the longer term.