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Avalanche (AVAX) fell 3.75% at press time, marking its second consecutive daily decline and signaling the potential for further losses.
Price action and derivatives data suggest that further decline may be ahead. According to CoinMarketCap, AVAX trading volume jumped more than 18% to $265 million.
Increasing volume during a price decline typically reflects strengthening bearish momentum, indicating that traders and investors are aligning with the downtrend.
A possible reduction of 30% for AVAX
Looking at the weekly chart, it appears that AVAX has struggled to reclaim its key support level of $8.50 after attempting to move back above.
On February 2, 2025, the asset fell below this level but recovered after strong buying activity. But this time he didn’t succeed.
Source: TradingView
Based on current price action, if AVAX’s weekly and daily candles close below the key $8.50 level, they could see a sharp 30% decline and potentially reach the $5.69 level. However, this bearish outlook would be invalidated if the price moves back above the $8.50 level.
At press time, the average directional index (ADX), an indicator that measures the strength of a trend, reached 36.93, well above the key threshold of 25. This indicates that AVAX has strong directional momentum.
Amid this decline and bearish price action, a well-followed crypto analyst shared an article accompanied by a video stating that AVAX has broken out of a bearish flag pattern and is poised to reach the $6.55 level in the coming days.
Traders turn to leveraged short positions
Besides price action and forecasts, another factor currently reinforcing this bearish view is derivatives analysis tool CoinGlass.
The latest liquidation chart from the AVAX exchange shows that intraday traders are heavily targeting two key levels: $8.04 on the downside and $8.59 on the upside. These levels hold the highest concentration of positions.
Additionally, the data reveals that traders constructed $2.19 million in long leveraged positions and $3.46 million in short leveraged positions. Together, this positioning highlights the strong bets placed around these price levels.
Source: CoinGlass
These positions indicate that intraday traders are strongly following the prevailing market trend and largely believe that AVAX price is unlikely to breach the $8.59 level in the near future.
Final Summary
- AVAX appears to be failing to hold its key support level of $8.50.
- Intraday traders are betting heavily on short positions, while experts suggest that AVAX is close to reaching the $6.55 level.
