Avalanche - The Next $100+ Billion Cryptocurrency?
Dear investors,
Welcome back to Thursday’s free newsletter, where we discuss investable assets by their history, current and future outlook with technical analysis.
In today’s newsletter we will focus on a relative new cryptocurrency, Avalanche. After reading this newsletter, you understand what Avalanche is, what it makes special and if it has potential to invest in.
Topics we will discuss:
Avalanche explained
AVAX
Technical analysis
Conclusion
Foreword
In the twelve years since the creation of Bitcoin, we have seen countless efforts to create the next generation of decentralised assets and applications. With every new attempt, most ran into the blockchain dilemma where you had to only two of the three requirements: Safe, scalable and decentralised. Now with the next generation of blockchain, blockchains no longer has to meet only two of the three requirements, as is the case with Bitcoin, Ethereum and BSC, for example.
The popularity around crypto exploded in the last years and the market is waiting for a real breakthrough to solve scaling issues and high (gas) fees that are diminishing growth and the potential impact of innovation within decentralised finance (DeFi).
Avalanche explained
Avalanche is an open-source platform for launching DeFi applications and enterprise blockchain deployments in one interoperable, highly scalable ecosystem.
It is the first smart contracts platform that confirms transactions in under one second, supports the entirety of the Ethereum development toolkit and enables millions of independent validators to participate as full block producers.
One big difference between Avalanche and other decentralized networks is the consensus protocol. Over time, people have come to a false understanding that blockchains have to be slow and not scalable after seeing the existing blockchains in action. The Avalanche protocol employs a novel approach to consensus to achieve its strong safety guarantees, while achieving quick finality and high-throughput, without compromising decentralization.
Unlike other networks that force terms and conditions of network participation uniformly across the system, Avalanche empowers individuals and enterprises to easily create powerful, reliable and secure applications and custom blockchain networks with complex rulesets or build on existing private or public networks that fit their use case.
Avalanche is a fixed cap asset, with a max of 720 million AVAX in circulation. It employs Satoshi’s UTXO model for single-use credentials to simplify payments.
“Avalanche aims to follow in Satoshi’s footsteps to have the same, defining impact as Bitcoin by creating a market structure driven by velocity, efficient use of capital and innovation in new products and services that aren't possible today.”
Emin Gün Sirer - Founder and CEO of Ava Labs.
AVAX
The Avalanche (AVAX) token is the native token of the Avalanche platform and is used to secure the network through staking, pay for fees and provide a basic unit of account between the multiple subnetworks created on the Avalanche platform.
Technical analysis
$AVAX - 4h chart
At the time of writing, AVAX is trading around $55 and is trying to hold its local support. Yesterday it dipped a little below it but managed to climb back above, with the RSI in the oversold zone investors did not hesitate to add some positions.
If we wanted to invest in Avalanche, we see two potential scenarios where we wanted to add positions:
The first scenario is waiting for the price to hold its local support line (indicated in blue). If it holds and starts a new uptrend by breaking it recent high wick, we would add more positions.
Our second scenario is if AVAX’s price falls below the local support line, we are waiting of a reaction at around $48, that is a decline of 13% from its current price.
$AVAX - 1D chart
If we zoom a little out to the daily timeframe, we can see the whole price history of AVAX. Our view remains the same on this timeframe, with the MACD back at respectable levels and the RSI slowly coming back to the oversold range. We see more bullish price action in the coming several months.
Can the price go even further down? Absolutely, the MACD is showing deep negative momentum and it needs time to go cross back to indicate bullish signals. In theory the RSI indicator can go further down to oversold levels (30 and below) to satisfy long-term investors before entering positions. But we believe we have seen the worst already. AVAX already corrected 30% from its all-time high.
Conclusion
Avalanche, a new third generation application what offers a secure, fast and decentralised experience towards their users. A better and more efficient way in applications than the most popular cryptocurrencies and scalable for long-term growth in its platform.
With a valuation of around $12 billion, Avalanche has already grown considerably and is in the top 20 of most valuable currencies by market cap. But we believe that Avalanche will grow substantial more in the coming months to years when it catches the attention of the general public.
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