The $1 Billion Loss in Stablecoin Market Cap for Avalanche – What’s on the Horizon for AVAX?
As of the latest data, Avalanche [AVAX] was positioned as the eleventh cryptocurrency in terms of market capitalization. The question arises: Can it utilize its increasing transaction volume to elevate itself into the top ten, or will market forces drive it downwards?
The future trajectory of Avalanche is contingent primarily on its network performance, which has recently yielded some mixed outcomes.
One notable aspect is the growth in daily transactions on the Avalanche blockchain.
On the 8th of January, daily transactions peaked at 586,650, marking a significant upsurge over the past ten months and underscoring the network’s robust utility growth.
While a rise in daily transactions signals a positive trajectory for the network, it is crucial to capitalize on growth opportunities holistically by fostering growth in Total Value Locked (TVL) and stablecoin count.
Recent data from DeFiLlama indicates that both TVL and stablecoin market cap on the Avalanche network have encountered challenges in maintaining upward momentum.
For instance, Avalanche’s TVL stood at $1.375 billion, representing approximately 10% of its all-time high achieved in December 2021.
Furthermore, liquidity within the Avalanche network has been dwindling. The stablecoin market cap surged to $4.68 billion in March 2022, plummeted to $1.051 billion by the end of November 2023, rebounded to $2.43 billion in 2024, and initiated the current year with notable outflows.
Over the past ten days, Avalanche witnessed a substantial decline in stablecoin market cap by around $1 billion, with the TVL decreasing by approximately $140 million during the same timeframe.
AVAX Nears Significant Support Level Post Recent Decline
The impact of the varied network performance metrics (rising transactions and diminishing stablecoins) on AVAX’s price trajectory remains uncertain.
The price action of the cryptocurrency has been closely tied to prevailing market conditions.
At the time of reporting, AVAX was trading at $36.46, reflecting an 18.7% decline since the beginning of the week.
AVAX is approaching a critical short-term support around the $35 mark, which could potentially facilitate a brief recovery. Insight into demand dynamics may be gleaned from historical concentration data.
Whale holdings saw an increase from 26.53 million AVAX (24.42%) on January 1st to 25.59 million AVAX (24.35%) by January 8th.
Notably, the most significant shift was observed in the investor category, which holds the highest AVAX supply.
Investors reduced their holdings from 49.59 million coins (45.65%) to 47.06 million coins (47.78%).
Retail investors also trimmed their holdings from 32.51 million AVAX (29.93%) to 32.43 million AVAX (30.87%) during the same period.
The historical concentration data reinforces the trend of outflows across all major categories, suggesting a cautious stance among investors.