AVAX's Recent 7% Rally: Opportunities and Potential Risks Ahead

Summary:
Avalanche (AVAX) recently saw a notable 7.4% increase in its price following an announcement about its partnership with Securitize, a platform focused on tokenizing real-world assets. While this partnership is a positive development, there are concerns about potential price fluctuations due to liquidation risks.

Key Takeaways

Avalanche's partnership with Securitize aims to establish a pan-European Trading and Settlement System.
Avalanche's transaction capacity significantly exceeds current usage, signaling strong potential for growth.
The price of AVAX surged to around $15 but faces risks due to high-leverage liquidations below this range.
Monitoring key price levels is crucial for investors looking for buying opportunities or warning signs of market shifts.

AVAX rallies on Securitize partnership, but there is a threat of a downward liquidity hunt

Understanding the Recent Developments in AVAX

Avalanche (AVAX) made headlines on November 27 when it announced that its blockchain would facilitate Securitize’s efforts to launch a trading and settlement system across Europe. Securitize, recognized for its role in tokenizing real-world assets (RWAs), has obtained full regulatory approval from Spain’s CNMV, marking a significant milestone as it develops the European Union's first blockchain-driven trading platform.

The decision to utilize Avalanche’s technology was influenced by its capable and efficient architecture, which is well-suited for institutional applications. This partnership has sparked increased optimism for both the AVAX token and the overall Avalanche ecosystem.

Avalanche Metrics

Source: Token Terminal

According to data from Token Terminal, Avalanche has maintained an average of 23 transactions per second (TPS) and approximately 30,000 daily active addresses over the past week. While this TPS is comparable to Ethereum (ETH), Avalanche boasts a much higher theoretical capacity of 4,500 TPS with finality achieved in just 2 seconds, as reported by Nansen.

The selection of Avalanche by Securitize indicates a network that is currently operating at a fraction of its capabilities, underscoring an adoption strategy rather than being limited by technological confines. This development positively influenced the AVAX token price, which surged by 7.4% within eight hours of the announcement, though it has since stabilized in the $14.9-$15 range.

Avalanche Liquidation Map

Source: CoinGlass

The initial rally began at $13.9 and coincided with a situation where high-leverage long positions had their liquidation points around $13.65. The liquidation map indicates that the long liquidations surpass short liquidations at this level, which presents a potential risk: a price drop could trigger these liquidations, posing a threat to the current price stability over the weekend.

Avalanche 4-hour Chart

Source: AVAX/USDT on TradingView

An analysis of the 4-hour price chart reveals that Avalanche’s previous downtrend is slowly reversing, with earlier resistance levels being reshaped into support. The latest support level is identified at $14.84. The recent rally has also left an imbalance around the $14 mark. Based on the liquidation data, a price pullback to around $13.5-$13.7 could provide a viable buying opportunity for traders. Conversely, a close below $13.91 in the H4 trading session could indicate a breakdown in market structure, suggesting a weakening of bullish momentum.

Closing Thoughts

Overall, while the partnership with Securitize offers a promising outlook for AVAX, investors should keep a close eye on market indicators and potential liquidation risks that could impact short-term price movements. Monitoring these key levels will be essential for making informed investment decisions in the volatile crypto market.