Recent market activity has seen Avalanche [AVAX] experience significant fluctuations, with its price declining after breaking out of a symmetrical wedge pattern. Is there a possibility of the altcoin dropping to $20?
What’s Next for AVAX: Reversal in Trend or Further Decline?
An analysis by CryptoCrypto indicates that AVAX has broken out of a symmetrical triangle pattern, typically signaling a bearish trajectory. This setup suggests a potential downward movement with a target price of approximately $20.
The pattern, characterized by converging trendlines signifying consolidation before a breakout, indicates significant market indecision before confirming the downtrend.
Supporting this bearish sentiment is the Cumulative Volume Delta (CVD), which has sharply decreased to -5.143M. The CVD assesses the net buying and selling pressures by comparing buy and sell order volumes.
The negative value indicates a prevalence of sell orders, reinforcing the current downward momentum.
Furthermore, the Relative Strength Index (RSI) remains below 50, suggesting persistent bearish pressure and limited upward potential in the short term.
Is AVAX Currently Undervalued?
The Market Value to Realized Value (MVRV) ratio suggests that AVAX’s MVRV ratio has recently experienced volatility, with noticeable peaks followed by corrections.
A high MVRV ratio often signifies overvaluation, prompting traders to sell for profit-taking, thereby exerting downward pressure.
Conversely, a low or negative MVRV ratio hints at undervaluation, potentially presenting a buying opportunity.
Given the current price movement of AVAX, the MVRV ratio suggests that early investors might still be holding unrealized losses. A sustained low ratio could indicate an accumulation phase before a potential recovery.
However, a rapid rebound in the ratio could lead to profit-taking actions that might impede any bullish momentum.
Diminishing Enthusiasm or Strategic Withdrawal?
The Open Interest (OI) has recorded a notable decrease in AVAX’s OI, indicating a significant reduction in speculative trading.
With OI dropping to 79.855M, traders seem to be closing positions, a sign of uncertainty or diminished confidence in price resurgence.
This decline in OI aligns with the prevailing bearish sentiment, suggesting that fewer traders are eager to initiate new leveraged trades on AVAX.
However, a sudden rise in OI would signal renewed trader engagement, potentially indicating a reversal in trend or impending price volatility.
In summary, recent market trends for AVAX imply a bearish outlook, with a potential price target of $20 post the breakout from the symmetrical triangle pattern.
The negative CVD and RSI below 50 affirm the continued bearish momentum.