Avalanche's Crash Sparks Debate: Bearish Liquidations or Bullish Setup?

Avalanche (AVAX) plunged 27% in recent trading sessions, erasing $222 million in market value as leveraged traders faced mass liquidations during a volatile price correction. The sharp selloff, driven by a combination of bearish sentiment and strategic exits by large holders, has sparked debate among traders and analysts. While short-term pessimism dominates, some bulls argue the pullback presents a buying opportunity, citing strong on-chain metrics and institutional inflows as catalysts for a potential rebound toward $30.

The liquidation data underscores the market's fragility. Over $290,000 in leveraged positions were wiped out in a 24-hour period, with short liquidations surging as traders bet on further declines. Liquidation heatmaps revealed concentrated selling pressure between $21.39 and $23, creating a defensive barrier for bears. However, contrarian traders view these forced exits as a sign of exhaustion, with some suggesting a short squeeze could follow if buyers step in to defend key support levels.

Whale activity has exacerbated the downturn. On-chain analytics show a 95% drop in whale transactions above $1 million, signaling a retreat by institutional investors. This exodus has left retail traders exposed to heightened volatility, with AVAX failing to reclaim critical resistance levels above $35 despite a record $34 billion in September decentralized exchange (DEX) volume. The surge in DEX activity, however, highlights growing confidence in Avalanche's DeFi ecosystem, which now ranks as the seventh-largest platform by 30-day trading volume.

Optimism among long-term holders is fueled by recent developments. Hivemind Capital Partners announced a $550 million fundraising plan for AVAX One, a project aimed at tokenizing financial assets on the Avalanche blockchain, with Anthony Scaramucci serving as advisory chair. This institutional backing, coupled with a $250 million funding boost for the Avalanche9000 upgrade in December, has reinforced the network's technical roadmap. Analysts argue that the upgrade, designed to enhance scalability and throughput, could attract fresh capital inflows and solidify Avalanche's position in the DeFi space.

Technical indicators offer a mixed outlook. While the RSI and MACD suggest bearish momentum, the 50-day and 200-day moving averages remain in a bullish alignment, with AVAX trading above $27-a critical threshold for maintaining an uptrend. A sustained break above $35 could trigger a rally toward $43, according to some analysts, while a drop below $27 would invite a retest of support near $23. The Long/Short Ratio on Binance, currently at 2.67, also hints at lingering bullish sentiment, though elite traders have adopted a more cautious stance.

Despite the near-term turbulence, the broader crypto market's cautious tone has not dampened enthusiasm for Avalanche's utility-driven growth. Stablecoin inflows, real-world asset (RWA) adoption, and expanding institutional interest-evidenced by ETF applications from VanEck and Grayscale-suggest a foundation for long-term appreciation. Analysts at Changelly project AVAX could reach $30 by late 2025, with more aggressive forecasts targeting $150 if the token breaks through $55 resistance.

[1] This is the Full Title of the First News Article (https://www.gate.com/crypto-market-data/funds/liquidation-data/avax)

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