Avalanche Faces Risk as Staking Yields, Active Addresses Decline

Avalanche Struggles Amid Weak On-Chain Metrics and Declining Staking Yields

Avalanche (AVAX), currently the 14th-largest cryptocurrency, is facing a deep bear market as weak on-chain metrics and falling staking yields weigh on the network. The cryptocurrency has seen a significant drop in value, with prices plummeting over 63% from its peak in March 2023.

Decline in Avalanche Active Addresses

Avalanche (AVAX) is trading at $23.8, down from its March highs, with its market cap dropping from over $22 billion to $9.57 billion. This decline is driven by weak on-chain activity. According to data from Nansen, the number of active addresses has fallen to 43,208, down from 91,000 in March and an all-time high of over 555,000 in April 2023.

In addition to the drop in active addresses, other key metrics have also decreased:

• Transactions: From over 600,000 in March to 155,000 on Sept. 10.
• Gas Fees: Down to less than $20,000, compared to a year-to-date high of over $300,000.

Falling Staking Yields and Token Outflows

Data from StakingRewards reveals that Avalanche’s staking yield has dropped to 7.9%, the lowest level since November last year. This decline is partly due to a reduction in the amount of AVAX staked in the network. Over 21 million AVAX tokens, valued at over $494 million, have left the network in the past 30 days, with a significant portion of these outflows occurring on Sept. 11.

Increasing Competition from Other Networks

Avalanche is losing market share to other Layer 1 and Layer 2 networks, such as Solana (SOL), Tron (TRX), Arbitrum, and Base. For instance, Base, launched in 2023, has seen rapid growth with over 1.6 million active addresses. The network’s decentralized exchanges (DEXes) handled transactions worth $3.4 billion in the last seven days, compared to Avalanche’s $554 million. Base also boasts a DeFi Total Value Locked (TVL) of $1.4 billion, while Avalanche’s stands at $923 million.

Avalanche’s Technical Analysis: Bearish Outlook

Avalanche is at risk of further downside. The coin formed a “death cross” pattern in June, where the 200-day and 50-day moving averages crossed in a bearish manner. Since then, AVAX has continued to form lower lows and lower highs, remaining below both the 50-day moving average and the key 61.8% Fibonacci retracement level.

The bearish trend is expected to continue as long as Avalanche stays below the 200-day moving average, indicating more potential downside for the cryptocurrency.