Avalanche [AVAX] has stood out as a top performer in the midweek crypto market activities. The price of AVAX surged to a three-week high of $26.52 earlier today, continuing the rally that began overnight on September 18.
At the time of writing, the altcoin was trading 12% higher over the past 24 hours.
The rise in the price of AVAX coincided with a broader rebound in the crypto market, driven by positive macroeconomic conditions.
The current optimistic sentiment follows the U.S. Federal Reserve’s decision to reduce interest rates by 50 basis points to 4.75%-5% on September 18.
This latest adjustment in the fed funds rate signaled a change in monetary policy, aiming to control inflation and support economic growth.
The Federal Reserve’s move marked the first rate cut in four years and only the third time policymakers have initiated a rate cut with a 0.5% reduction.
While widely expected, the decision still led to volatility in both stock and crypto markets. Data from IntoTheBlock indicates that the price increase of AVAX has put 49% of token holders in a profitable position.
Many anticipate further rate reductions in the final quarter, but opinions on the impact of the Federal Reserve’s 50 bps cut on risk assets vary.
Some analysts believe that the recent adjustment will only offer a short-term boost to the cryptocurrency market.
Outlook for Avalanche’s DeFi Sector
The recent price surge of AVAX aligns with Avalanche’s growing presence in the decentralized finance (DeFi) sector.
The total value locked (TVL) in Avalanche, denoted in AVAX, increased by 11% from 28.1 million AVAX in Q1 to 30.8 million in Q2. Data from DeFiLlama indicates that the TVL of Avalanche has been on an upward trajectory.
As of September 18, the TVL across all protocols on Avalanche stood at 38.63 million AVAX. The top three protocols by TVL continue to dominate the ecosystem in Q3.
However, Benqi has surpassed Aave as the largest protocol on the platform.
TVL serves as a crucial metric for gauging adoption and activity within a DeFi ecosystem. Generally, a higher TVL signifies robust liquidity and user participation, which supports a positive outlook in price movements.
AVAX Approaches Significant Resistance Level
According to TradingView’s AVAX/USDT daily chart, the pair is currently trading above the 100-day Simple Moving Average (SMA) at $25.23 and the 50-day SMA at $22.82.
The midweek price surge has led AVAX to break out of a descending channel that has dictated its price trend since late May 2024.
Nevertheless, AVAX is now encountering strong resistance within the $27.92 to $30.14 range – a zone that has proven to be a notable obstacle for over the past three months.
This range is pivotal, as the resistance has been tested multiple times without a successful breakthrough.
A successful breach of this zone could pave the way for an upward movement, with bullish investors targeting $33 as the next milestone.
Failure to maintain the positive sentiment and overcome this resistance might result in a drop below the 50-day SMA at $22.82, potentially leading to a retracement towards the support level around $19.50, which was tested earlier this month.