The past month has been filled with ups and downs for the Avalanche (AVAX) network, with the most notable upside being the recently launched Avalanche9000 mainnet. This was followed closely by the Etna upgrade activated on the recently launched mainnet on December 16.
In this article, an analysis of network upgrades alongside technical indicators sheds light on potential price movements in the coming weeks.
Avalanche9000 launch: Short-term price dip overshadows technical progress
The recent Avalanche9000 mainnet activation, featuring the Etna upgrade, represents a significant technological leap forward. This upgrade addresses critical issues like high staking costs and validator restrictions, making the network more attractive to developers and investors. The recent $250 million funding round from 40 VC funds also shows how much confidence institutional investors have in the project’s future.
At the time of writing, the token had dropped by nearly 9% in 24 hours and 19% in the last 7 days. It is not far-fetched to conclude that the temporary suspension of deposits and withdrawals has created short-term uncertainty in the market.
While trading continues, this technical limitation could contribute to the current price volatility and explain some of the recent downward pressure.
AVAX technical analysis
Judging by the current state of the technical indicators taken over a 1-month period, the token appears to be in a neutral position with room for price appreciation in the new year. The price action shows AVAX trading around the $42.71 mark, having recently broken below crucial support levels.
The trading chart reveals a concerning downward trajectory, with the asset breaking below two significant support zones – first at $50 and then at $45, suggesting increased selling pressure.
The Relative Strength Index (RSI) is currently hovering around 45.46, positioning itself in neutral territory but with a slight bearish bias. This indicates that while AVAX isn’t technically oversold, the momentum isn’t strongly favoring buyers either.
Similarly, the MACD indicator shows a subtle positive divergence, with the blue line crossing above the signal line. This potentially hints at a short-term bullish momentum building up. However, traders should approach this signal with caution, given the overall bearish trend.
Avalanche (AVAX) Monthly Trading Chart
Trading outlook and potential scenarios
Looking ahead, traders should watch the key resistance level at $50, which has now transformed from support to resistance. The price action suggests that AVAX might need to establish a new support base before attempting to reclaim higher levels. The increased network activity, evidenced by November’s $1.5M in fees (up from the usual $800K), could translate into price appreciation once the upgrade-related uncertainties settle.
For traders considering positions, the current technical setup suggests practicing caution. While the fundamental developments are broadly positive, the price action indicates that the market is still digesting these changes.
The lower gas fee structure introduced by the upgrade might impact validator revenues, and the market will need time to adjust to this new economic model.
However, traders should brace for continued volatility as the market adapts to the new network dynamics. Potential investors should maintain strict risk management practices while monitoring how the market adapts to these substantial network changes.
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