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Avalanche’s AVAX token has experienced a significant downturn, losing over 60% of its value in the past year, despite a remarkable increase in stablecoin supply.
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This dichotomy arises as on-chain data suggests that new liquidity from stablecoins may reflect passive investor strategies rather than an active drive for network utility.
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“The apparent contradiction between surging stablecoin value on Avalanche and AVAX’s significant price decline likely stems from how that stablecoin liquidity is being held,” explained Juan Pellicer from IntoTheBlock.
Avalanche’s AVAX token struggles due to passive stablecoin investment behavior, even as market analysts suggest a potential crypto bottom by June 2025.
Avalanche’s Stablecoin Surge: An Overview of Market Dynamics
The Avalanche network has seen its stablecoin supply rise dramatically, increasing by over 70% in the past year and reaching more than $2.5 billion as of March 31, 2025. This substantial surge typically indicates a growing investor appetite in the crypto market. However, the situation presents a paradox; while stablecoin assets have swollen, the price of AVAX has plunged, suggesting underlying issues with how this liquidity is being utilized. Investors are preoccupied with global economic uncertainties, particularly the impending tariff negotiations in the United States, which add to the market’s bearish sentiments.
The Passive Investment Dilemma: Analyzing AVAX’s Downtrend
Despite the increase in stablecoin liquidity, the lack of active engagement within the Avalanche decentralized finance (DeFi) ecosystem raises concerns. According to Juan Pellicer, the substantial inflow of bridged Tether (USDT) appears significantly dormant, serving more as treasury holdings rather than actively contributing to the ecosystem. “If these stablecoins aren’t being used in lending, swapping, or other DeFi activities, their presence alone wouldn’t necessarily boost the AVAX price,” Pellicer stated. As such, the market is left to grapple with the reality of these passive investments, which fail to stimulate the demand typically expected for AVAX usage.
Market Sentiment and Potential Recovery: Insights from Analysts
As the broader crypto market faces a correction, analysts from the Nansen platform express cautious optimism regarding a potential recovery. They predict a 70% chance that the market will find its bottom by June 2025, contingent on positive outcomes from ongoing tariff-related negotiations. Aurelie Barthere, principal research analyst at Nansen, indicated, “Once the toughest part of the negotiation is behind us, we see a cleaner opportunity for crypto and risk assets to finally mark a bottom.” This perspective suggests that resolution in traditional markets may rejuvenate interest in cryptocurrencies.
Implications of Tariff Negotiations on Crypto Markets
The looming US tariff announcement on April 2 has highlighted tensions in both traditional and cryptocurrency markets, leading many investors to adopt a wait-and-see approach. Nansen’s April 1 research report indicates that both BTC and major US equity indexes have struggled to gain traction, with recent price movements failing to break above significant moving averages. Until a clearer resolution emerges, traditional and crypto investors may remain on the sidelines, intensifying the prevailing bearish trend.
Conclusion
The current phase for Avalanche’s AVAX token is emblematic of the struggles many cryptocurrencies face amidst a backdrop of economic uncertainty. Although stablecoin supply rises, the lack of active engagement within the Avalanche ecosystem means potential price recovery remains contingent on broader market movements and resolution of external pressures such as tariff negotiations. Investors should remain vigilant as developments unfold, as a clearer market direction could emerge with time.
