Avalanche or AVAX, is a known blockchain platform that offers speed and scale to its users. The token has been through some tough times. Trading at $34.87, the price action still remains bearish. The overall market trends and indicators are playing significant roles in this. This downward pressure has been made worse by the token not breaking above key resistances, which has kept traders’ eyes on key levels of recovery or further drop.
Resistances Remain a Problem
Further analysis of the Volume Profile Visible Range (VPVR) shows that between $40 and $42, there was very high trading activity, which acted as a strong resistance zone because at this zone, traders had shown strong buy and sell orders.
Despite December’s rally trying to break this range, AVAX got rejected consistently, which reinforced the bearish sentiment. This price action can only mean that market participants are hesitant to push AVAX higher without a clear catalyst.
On the other hand, support at $27 was a key zone. This zone had been an accumulation zone in the pas,t which might mean there’s buying pressure and interest. A break below this support would have accelerated the bearish momentum towards $25.
Market Participation Dries Up as Everything Goes Bearish
Data on open interest (OI) has shown a drop in market participation with the recent price drop of AVAX. A drop is a sign of less speculative interest as traders are closing their positions due to uncertainty on short term recovery.
This drop in OI also coincides with AVAX not being able to hold above $55 last month. A drop in OI during a correction is a bearish sign as traders are unwinding their longs and waiting for clearer direction.
For the bulls to come back, AVAX needs to break above the resistance zone of $40-$42 and OI should also increase. If instead the declines continue while the price tests lower support levels, it could mean more bearishness.
Technical Indicators: Oversold or More Downside?
On the daily chart, AVAX’s RSI is below 50, hovering around 35. This means bearish momentum and buying pressure are weakening.
An RSI below 30 could mean oversold and might attract bargain hunters and lead to a short term bounce. However, such a bounce will not be sustainable unless the RSI also breaks above 50 to mean bullish strength is back.
If AVAX can’t hold above key resistances even after a short-term bounce, it could mean more downside. If AVAX goes below $27, traders will look at $25 as the next support.
Sentiment is Bearish
The market sentiment is also bearish as seen in the shorts to longs ratio in AVAX/USDT. This is in line with AVAX rejection from the resistance zone of $40-$42 and the overall bearish view.
Increased short interest means the market expects more downside but extreme imbalances in long/short ratio can sometimes precede a sharp price reversal. In such a case, the price might be higher due to a short squeeze as shorts are being liquidated.
It would need consolidation or even longs to be favored for a clear sign of a permanent upturn. Till then, shorts will lead the bearish momentum and price action will be limited.
Conclusion
AVAX is at a crossroads as traders watch the key resistance of $40-$42 and support at $27. Technical and market indicators are bearish, but short squeezes and oversold conditions can cause temporary price reversals.
For a sustained recovery, AVAX needs to break above its resistance and regain market confidence. Till then, cautious optimism and market trend-watching will be needed to navigate the current volatility.
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FAQs
1. What’s behind AVAX’s bearishness?
Factors behind AVAX’s bearishness are the failure to break above the resistance zone of $40-$42, decreasing OI and market uncertainty. In this regard, other technical indicators are low RSI which means buying pressure is weakening.
2. What are the support and resistance levels for AVAX?
Between $40-$42, the resistance for AVAX is strong, and at $27, there is a major support. If that is broken then price might go to $25 range.
3. Can AVAX come back from this decline?
AVAX needs to break above its resistances and, more importantly, improve market participation with an increase in OI and RSI. Short-term bounces can happen when local oversold conditions are met, but a proper recovery needs bullish momentum.
4. What’s the role of OI in AVAX’s price action?
OI is a mirror of market participation. Decreasing OI means decreasing speculative interest and bearish sentiment. Increasing OI on price gains means traders are coming back to the market.
