Avalanche is a smart contract-enabled platform that offers fast transaction settlement at a low cost. Like many blockchain platforms in the DeFi industry, the protocol is an alternative option to Ethereum’s scaling and gas fee problems.
Avalanche provides 4k to 5k transactions/second with a finality time of 2 to 4 seconds. It’s home to hundreds of popular decentralized applications (dApps), which comprise Avalanche’s over $2.8 billion total value locked (TVL).
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AVAX Price: What’s Moving It Up and Down?
AVAX’s price fall was largely linked to Terra USD’s sudden meltdown.
The implosion caused a domino effect of users withdrawing their riskier assets favoring BTC, ETH, and even fiat. To put in perspective, throughout May and June, crypto lending protocols and hedge funds such as Celsius, Voyager and 3AC became insolvent, liquidating billions of dollars worth of positions in the market. Layer 1 protocols like BNB Chain and Polygon saw declines in network activity of 16% and 29% respectively.
AVAX has been experiencing rough price shakes since the start of 2022. The token is down more than 70% from its all-time high of approximately $144 in November 2021. By June 21st, the number of addresses interacting with Avalanche dApps declined over 40%. This further plunged AVAX’s price from approximately $41 on May 9 to $14 in mid-June.
However, Avalanche’s Total Value Locked (TVL) didn’t drain drastically, according to data from DeFiLlama. One could assume that investors didn’t rush to withdraw tokens from the protocol’s various dApps.
If we look at the daily chart on TradingView, we see AVAX has been on a bullish rally: up over 50% from its lowest cycle at the $14 price in June.
AVAX Long-Term Price Prediction
Avalanche has become a popular topic of conversation for many cryptocurrency price analysts, who see strong upside potential for AVAX in 2022.
As of August 26th, Avalanche holds a market cap of over $6.19 billion —a considerable increase from June’s low cycle of $4.8 billion. But why are investors so keen on Avalanche? We’ll have to look at the protocol’s fundamentals, TVL, and other important aspects that will act as the lynchpin for its success.
Avax Fundamentals
Avalanche can be used by the common user who simply wants cheaper and faster transaction fees, as well as enterprise clients who want to implement apps in their tech startups or institutions.
The network is divided into three chains:
- The Contract Chain (C-Chain), for the creation of smart contracts, dApps. It’s EVM-compatible.
- The Platform Chain (P-Chain) is the metadata blockchain. It coordinates network validators. It allows clients to create blockchains and subnets, add validators to those subnets, and keep track of active subnets.
- The Exchange Chain (X-Chain) is where users can create and trade digital assets and pay for network fees using AVAX.
Avalanche’s blockchain model and overall fundamentals captured the attention of the crypto community, blockchain developers, as well as digital assets investment funds. The protocol is backed by notable investors and institutions including Polychain Capital, Andreessen Horowitz (A16Z) and Dragonfly Capital.
Avalanche dApps With Long-Term Upside Potential
In a previous statement, we outlined that Avalanche’s TVL remained steady despite AVAX’s price fall. Here are the top dApps that help Avalanche keep up with its TVL by building and providing new products/services:
- Benqi: Avalanche’s leading liquidity staking protocol with over $300 million in TVL. On August 14th, Benqi partnered with Symbiosis, a cross-chain liquidity aggregator, to allow users to lend crypto and provide liquidity to pools on both platforms.
- Trader Joe: a decentralized exchange with over $220 million in TVL. It allows users to trade, swap, farm and stake cryptocurrency. Its native token, JOE, was highlighted by popular crypto trader Lark Davis as one of the top 5 coins to hold.
- Platypus Finance (PTP): is a liquidity protocol for stablecoins, boasting over $200 million in TVL. It’s a single-sided Automated Market Maker (AMM), meaning that instead of providing liquidity with two tokens, liquidity providers use a single token type, mitigating the risk of impermanent loss and slippage. On August 12th, the protocol announced an update that will bring fee sharing with vePTP holders, aiming to increase the value and demand of the PTP token.
Avalanche is continuously welcoming new projects of all kinds into its ecosystem, from GameFi, and NFTs, to payment systems and staking protocols.
In an interview with Anthony Pompliano, John Wu, Ava Labs President, said a lot of “big brand traditional enterprises” from the field of finance and gaming will be onboarding the Avalanche ecosystem in the next 12 months.
AVAX Staking and Burning Mechanism
Avalanche burns the fees paid in $AVAX across the network. The fee system varies. For instance, subnets carry higher fees (1 AVAX per transaction) than individual fees (roughly 0.001 AVAX). The rationale is to make AVAX a scarce asset and increase its value over time.
As of August 17th, over 1.9 million AVAX have been burned, or $53 million.
Another feature of Avalanche that pulls in many investors is its staking mechanism which pays an average of 9.02% per year. At the time of writing, there are over 1,200 validators, who have staked over 230 million AVAX. This represents over 60% of AVAX’s circulating supply.
The protocol has been growing in this aspect since it announced further support for subnets. The more subnets created, the bigger the number of validators.
Closing Thoughts, is Avax a Good Investment?
AVAX and other altcoins are in the eyes of many crypto analysts. While there’s room for a lot of upside momentum, things are always uncertain in the crypto market, so consider doing your own research if you want to add AVAX to your crypto portfolio.
For a comprehensive study of Avalanche and its core feature, check out CoinCentral’s full Avalanche blockchain guide.
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