- Avalanche price has erased some of its recent gains.
- There are concerns about its DeFi and NFT ecosystem.
Avalanche price pulled back this week as the US dollar and the VIX index rebounded. The AVAX token also dropped as the total value locked (TVL) in its ecosystem dropped to the lowest level since October last year. It is trading at $22.68, which is significantly below this month’s high of $30.84.
Why is AVAX retreating
Avalanche is a leading blockchain project that aims to become a better alternative to Ethereum and other smart contract platforms.
It is a proof-of-stake platform that is well-known for its excellent speeds, low transaction costs, and extremely low carbon emissions. AVAX is the governance token for its ecosystem.
There are three main reasons why the Avalanche price has pulled back in the past few days. First, investors are worried about its DeFi ecosystem. According to DeFi Llama, the platform’s TVL has collapsed from an all-time high of over $12 billion to about $2 billion.
Worse, this TVL is mostly due to a single DeFi protocol. Aave has a TVL of $918 million, giving it a market dominance of about 44%. Only four other DeFi platforms in Avalanche have a TVL of above $100 million.
Learn more about how to buy Avalanche.
Second, Avalanche price has retreated because of its performance in the NFT industry. Data compiled by CryptoSlam shows that the volume of NFTs sold in the ecosystem has dropped sharply recently. It moved from over $150 million in January this year to about $1.9 billion.
Third, the AVAX price fell because of the strong US dollar and the rising VIX index as concerns about the Federal Reserve. The dollar index jumped to $109 while the VIX, which is known as the fear gauge, has risen by over 20% in the past two days.
This performance was triggered by last week’s FOMC minutes and statements by Fed officials. They insisted that the bank will continue hiking interest rates.
Avalanche price prediction
The four-hour chart shows that the AVAX price has been in a strong bearish trend in the past few days. As it dropped, it managed to move below the ascending trendline that connects the lowest levels since June 19th.
The coin also dropped below the 25-day and 50-day moving averages while the MACD has formed a bearish divergence pattern. It has also formed a bearish flag pattern that is shown in green. The coin is between the 38.2% and 50% Fibonacci Retracement level.
Therefore, the coin will likely continue falling as sellers target the next key support at $20. A move above the resistance point at $23.7 will invalidate the bearish view.
