Avalanche (AVAX) Faces 66.3% Drop, Bulls Defend $16 Support

Avalanche (AVAX) has been holding onto its $16 support level, but long-term bulls face significant challenges ahead. The cryptocurrency has been battling to maintain its position above this critical support, with the $15.50 mark serving as a key battleground for bulls. If AVAX can successfully defend this level, it may pave the way for a potential recovery. However, if the support at $16 fails to hold, the next battleground will be in the $30 to $35 zone, where bulls will need to regroup and defend against further declines.

The current market sentiment for AVAX is mixed, with traders considering short-term plays if the price nears the lower support. A push past resistance could enable bulls to target higher levels, potentially reaching $2.37. However, the overall trend remains bearish, as indicated by the falling 50-day moving average on the four-hour chart. This suggests a weakening short-term trend, which could pose challenges for long-term bulls.

Despite the challenges, there are some positive factors that could support AVAX's price in the long run. The growing adoption of blockchain technology and the increasing number of companies using cryptocurrencies to diversify their holdings could provide a boost to AVAX's value. Additionally, the potential for an Avalanche ETF, with a 90% chance of approval by Q4 2025, could attract more investors and drive up the price.

However, the road ahead is not without obstacles. The bearish trend and the potential for further declines below the $16 support level pose significant risks for long-term bulls. Traders and investors will need to closely monitor the market and be prepared to adjust their strategies accordingly. The next few weeks will be crucial for AVAX, as it navigates through these challenges and seeks to establish a stronger footing in the market.

Recently, it was reported that smart money investors were at a profit and continued to hold their AVAX. Meanwhile, retail investors have begun to take profits, and derivative retail traders have started betting on short positions. The on-chain activity has begun to increase substantially over the past few days. It did not match the highs made in April, but the uptick in activity was encouraging. The 7-day active addresses change was at 204% at the time of writing. Sustained activity could drive demand for Avalanche and potentially aid its recovery. The price action also hinted at a potential bullish reversal.

The range extended from $16 to $22.9, with its mid-range level at $19.5. The recent losses saw a retest of the range lows, which had previously been defended as support in April and March. The bulls won the battle again, and it appeared likely that AVAX would climb to the $19.6 mid-range resistance. However, the technical indicators remained bearish. The Awesome Oscillator continued to reflect bearish momentum, and the OBV was below its early May low. This indicated that selling pressure had the upper hand. If the daily trading volume remains below average in the coming days as Avalanche moves toward $19.5, traders should prepare for a rejection at the mid-range resistance. While the 1-day chart showed a range formation and potential for a move to $22.9, it must be recognized that Avalanche was trading a long way south of where it had been in December 2024. The drop from $54 in December to $18.1 at the time of writing represented a 66.3% price drop in six months.

The Global In/Out of the Money metric showed that 65.95% of holders were out of the money, and 27.18% were at the money. This meant that there were large numbers of holders willing to exit the market at break-even. Even if Avalanche can rally, the number of sellers willing to exit the market would remain high, since many were holding losses right now. Given the weak sentiment around most altcoins, it appeared that Avalanche investors should remain cautious until the Bitcoin dominance began to plunge, and capital rotation into altcoins began to take place.