Avalanche’s AVAX Token Jumps on $180M Incentive Program

Avalanche’s AVAX Token Jumps on $180M Incentive Program

The price of AVAX, the token of the Avalanche platform, surged Wednesday after Avalanche announced plans for a $180 million “liquidity mining incentive program” to increase its scale in the world of decentralized finance (DeFi).

The token was up by 16% in the last 24 hours at press time, trading at $27.69. The price has more than doubled in the past month, according to data from Messari.

The Avalanche Foundation said in a press release that a $180 million DeFi incentive program titled “Avalanche Rush” will bring top DeFi applications to the platform, including Aave and Curve. Avalanche is a platform that’s used to build custom blockchain networks and decentralized applications, knowns as “dapps.”

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“Aptly dubbed ‘Avalanche Rush,’ the program will lead exactly to that, an avalanche of hot money rushing towards AVAX,” said Denis Vinokourov, head of research at Synergia Capital.

The token is still well off its all-time high of about $59 that it hit six months ago, according to CoinGeko.

“In the spirit of strength in numbers, strong partnerships, such as those utilized by Polygon with Curve, Aave and others, is a better strategy to attract and to retain users as opposed to re-inventing the wheel on their own,” Vinokourov said.

Often dubbed as an alternative to the Ethereum blockchain, Avalanche says the fact that it processes thousands of transactions per second and has low fees makes it a “haven for Ethereum defectors,” according to Messari research. It is not a single-blockchain network like Ethereum as it features multiple chains that perform different functions.

“As DeFi becomes more and more popular, it becomes clear that the Ethereum blockchain is currently struggling to fit all the activity. Thus, it is important to expand to other chains and layer 2s (L2s),” Michael Egorov, CEO at Curve Finance, said in the press release.

Avalanche (AVAX) in ‘overbought’ zone after 100% gains in a week — Correction ahead?

The Avalanche blockchain platform’s native asset, AVAX, fell on Aug. 19 as traders decided to secure their profits from its 100% upside move.

The AVAX/USD exchange rate plunged more than 16% after hitting a three-month high of $36.64, putting the brakes on a seven-day upside boom that saw its price rise by 111%. It appears that traders felt uneasy about entering AVAX markets near $36 because of its historical reference as a sell-off level, capping AVAX’s previous recovery attempts from March to May.

Overvaluation risks

AVAX also dropped on interim overvaluation fears. The daily relative strength index (RSI) of Avalanche’s token crossed above 70 during its upside boom. Essentially, markets consider an RSI reading above 70 as overbought for the underlying asset, noting that the price has climbed excessively higher and, therefore, should undergo a correction.

Avalanche (AVAX/USD) daily price chart. Source: TradingView

More evidence for AVAX’s interim overvaluation appeared when looking at the Bollinger Bands. The indicator consists of a middle band (a 20-period simple moving average) and two outer bands set at two standard deviations below and above the middle band.

When the price overreaches its valuation in the short term, it tends to jump above the upper band. Similarly, slipping below the lower band suggests that the asset is trading below its current valuation. AVAX crossed above the upper Bollinger Band following the latest price rally.

The two indicators were instrumental in predicting recent AVAX price corrections. For instance, during the February rally where AVAX surged over 500% in just two weeks, its RSI and Bollinger Bands both alerted t its excessive interim valuation.

AVAX momentum indicators alert overbought risks. Source: TradingView

The price wiped off 65% of its gains in the next three weeks to neutralize its overbought status. Its next interim support came at the 23.6% Fibonacci line ($22.29) of the Fibonacci retracement graph drawn between the $63.3 swing high and $9.62 swing low.

The same 23.6% Fibonacci level now serves as the next line of support should the price of AVAX correct following its RSI and Bollinger Bands alerts.

Fundamentals

The latest bout of AVAX’s price boom appeared in the wake of the launch of its $180 million “liquidity mining incentive program” to bring decentralized finance (DeFi) services to its blockchain platform, including lending platform Aave and automated market protocol Curve Finance.

Related: Avalanche Rush to give out more than 180M in DeFi incentives

AVAX’s bounce also appeared as a rally in the market of its top rival, Ether (ETH), flattened out. This is because traders tend to rotate capital out of overvalued markets to bet on assets they deem undervalued.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

3 reasons why Avalanche (AVAX) price is up 200% this month

Layer-one blockchain networks like Bitcoin (BTC) and Ethereum (ETH) form the foundation of the cryptocurrency ecosystem and enable smart contract functionality that has allowed the creation of new industries like decentralized finance (DeFi) and nonfungible tokens (NFT).

Avalanche (AVAX) is a relatively new layer-one solution that has recently seen a significant increase in price and adoption as the dominant smart-contract platform, Ethereum, continues to struggle with high transaction costs and slower processing times compared with its competitors.

Data from Cointelegraph Markets Pro and TradingView shows that after hitting a low of $12.24 on Aug. 3, the price of AVAX rallied 205% to a multi-week high at $37.42 on Aug. 20 as its 24-hour trading volume surged to more than $1.4 billion.

Three reasons for the significant price growth from AVAX are its rapidly expanding DeFi ecosystem, the release of the Avalanche bridge to Ethereum and the protocol’s unique tokenomic design that offers dynamic fees and a token burn mechanism.

Avalanche Rush expands the DeFi ecosystem

One of the biggest developments to happen for the Avalanche protocol was the announcement of Avalanche Rush on Aug. 18, a $180 million liquidity mining incentive program launched in conjunction with Aave and Curve that is designed to introduce more applications and assets to its growing DeFi ecosystem.

Experience the power of #Avalanche. Welcome to #AvalancheRush, the $180M liquidity mining incentive program in collaboration with leading DeFi dapps–both on and off Avalanche– starting with @aaveaave and @curvefinance. And, this is just Phase 1! https://t.co/YGrrVB7Uqc — Avalanche (@avalancheavax) August 18, 2021

Phase one of the Rush program is set to begin in the near future and will allow AVAX to be used as liquidity mining incentives for Aave and Curve users over a three-month period.

A total of $27 million worth of AVAX has been set aside by the Avalanche Foundation to fund the incentive program with additional allocations planned for phase two.

The program was designed to demonstrate the Avalanche Foundation’s commitment to scaling DeFi on the network and helping to “create a more accessible, decentralized and cost-effective ecosystem.”

Evidence of the growth of DeFi on the Avalance network can be found in the increasing total value locked (TVL) in protocols on the network, such as Pangolin and Benqi Finance which recently surpassed a TVL of $300 million.

Ethereum bridge facilitates asset migration

A second reason for the bullish growth seen in the Avalance ecosystem over the past few weeks is the release of the Avalanche Bridge (AB) on July 29. This “next-generation cross-chain bridging technology” enables the transfer of assets between the Avalanche and Ethereum networks.

The Avalanche Bridge (AB) launched just 3 weeks ago.

Today, AB officially transferred over $100M in tokens to and from Ethereum.

Interested in using high-performance DeFi apps, with low transaction fees? Transfer your assets, and try #Avalanche DeFi! https://t.co/UAY69mSUgW pic.twitter.com/FrN69Ev7pA — Avalanche (@avalancheavax) August 19, 2021

As shown in the above tweet, in the three weeks since the AB was launched, it has transferred more than $100 million in token value between the two networks as holders seek lower-fee environments to conduct their transactions.

The AB is estimated to be five times cheaper than the previous Avalanche-Ethereum Bridge (AEB) and it is purported to offer a “better user experience than any cross-blockchain bridges launched to date.”

If Ethereum is unable to get a handle on high transaction costs in the near future, there is a good chance that assets and liquidity will continue to migrate to chains like Avalanche as their DeFi ecosystems grow in size and value.

Related: Avalanche (AVAX) in ‘overbought’ zone after 100% gains in a week — Correction ahead?

Transaction burning improves AVAX tokenomics

A third reason for the increasing interest in the Avalanche network is the protocol’s unique tokenomic structure that includes a transaction fee burning mechanism that helps reduce the circulating supply over time.

#Avalanche burns all transaction fees.

See how much has been burned so far! https://t.co/LpxU9dtyXy — Avalanche (@avalancheavax) August 20, 2021

As noted in the above tweet, all fees on Avalanche are burned for the benefit of everyone in the community as the hard-capped supply of 720 million AVAX is guaranteed to decrease over time. This could help increase the value of the remaining tokens in circulation.

At the time of writing, more than 163,000 AVAX have been burned, a figure which increases more rapidly as more users transact on the network.

The network’s fee mechanism is also set to undergo an upgrade to Apricot phase three which will introduce C-Chain dynamic fees on Aug. 24.

⭐Apricot Phase Three: C-Chain Dynamic Fees

Apricot Phase Three upgrade will activate on @Avalancheavax Mainnet at 7 a.m EDT (11 a.m UTC) on Tuesday, August 24th

Get more info: https://t.co/XDS91iR4jD#Avalanche $AVAX pic.twitter.com/eJV0pVPbf3 — AVAX Daily (@AVAXDaily) August 16, 2021

The new integration will allow for the addition of a time-based rolling window fee calculation, a capped fee range of 75–225 nAVAX and a block gas limit of 8 million gas.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.