Avalanche (AVAX) price analysis: a 42% rally is possible

Avalanche may recover to $37 in the short term


The collapse in the Terra ecosystem made Avalanche tumble, as investors feared that the Luna Foundation Guard (LFG) and Terraform Labs (TFL), which had purchased 1.97 million AVAX and 1.09 million AVAX tokens respectively, may dump their holdings. As of 1 June 2022, the buyers are trying to sustain the recovery above $25.

The overall negative sentiment in the crypto space and concerns of a possible selloff in Avalanche resulted in a massive drop in its total value locked (TVL) from $11.1bn on 21 April to $4.08bn, according to the Defi Llama.

To address the nervousness among investors, Avalanche said in a tweet on 20 May that the AVAX tokens held by the LFG and TFL had been “immobilised’ and LFG had not outlined any plans to use the AVAX in view of the Terra chain fork.

Avalanche’s core team recently made a pitch to migrate the Yuga Labs’ Otherside and the ApeCoin ecosystem from Ethereum to Avalanche. Emin Gün Sirer, Ava Labs’ founder and CEO, tweeted in support on 25 May, saying that “ApeCoin would be fantastic as an Avalanche subnet.

Could the clarifications and a pitch to attract popular projects tempt long-term investors to start buying? Could AVAX go up? Read the AVAX price analysis to find out what the charts suggest.

Avalanche weekly chart
Avalanche weekly chart. Credit: Currency.com

Avalanche technical analysis: weekly chart

AVAX’s price has been in a waterfall decline for the past few weeks. The panic-driven selling easily pulled the price through the strong support at $40. The relative strength index (RSI) is nearing oversold levels, indicating that a consolidation or a relief rally is likely in the near term.

Any attempt to recover could face strong resistance at $40. If the price turns down from this level, it will suggest that the sentiment remains negative and traders are selling near overhead resistance levels. That could keep the AVAX/USD pair range-bound between $40 and $25 for some time.

If bears sink the price below $25, the pair could start its southward journey toward $17 and later to $10. 

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On the contrary, if buyers drive the price above $40, it will suggest that the downtrend may be coming to an end. The pair could then rally to the 38.2% Fibonacci retracement level of $52.91 and later to the 50% retracement level of $61.53.

Avalanche daily chart
Avalanche daily chart. Credit: Currency.com

Avalanche technical analysis: daily chart

AVAX’s price is in a downtrend, but the RSI is showing signs of a positive divergence, which suggests that the bearish momentum may be weakening. 

The bulls will attempt to start a recovery, which could reach the downtrend line. This level may act as a strong resistance, and if the price turns down sharply from it, the pair could retest $21.35.

A break and close below this support will suggest that bears remain in control. The pair could then resume its downtrend.

Conversely, if buyers propel the price above the downtrend line, it will suggest that the short-term downtrend is weakening. The bulls will then try to push the price to $37, where the relief rally may face strong selling. But if this level is crossed, a sustained recovery is possible.

Avalanche: Buy or sell at current levels?

Avalanche’s price analysis shows a downtrend, but the positive divergence on the RSI indicates the likelihood of a relief rally. The pair could rise to the downtrend line and thereafter to $37, where the bears may pose a strong challenge. This bullish view will be invalidated if the price plummets below $21.

Whatever the outcome might be, your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you are about losing money. This analysis does not constitute investment advice. It’s important to make your own analysis before deciding to invest. You should never invest more than you can afford to lose.

AVAX to US Dollar
Daily change
Low: 18.8194
High: 20.0291

Further reading

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