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AVAX could see a sharp reversal soon



Avalanche's price held steady on Wednesday while other cryptocurrencies like Bitcoin fell back. The AVAX token is trading at $ 96.30, a few points below the key resistance level of $ 100. This trend brings the total market capitalization of all AVAX coins in circulation to more than $ 21 billion.

Why is AVAX increasing so much?

Avalanche's price has performed relatively well as investors ponder its growing market share in the DeFi industry.

First of all, Avalanche is a competitor to Ethereum, which is best known for its tremendous speed. This means that transactions are processed faster on this network than on other platforms.

Ethereum, for example, can only process fewer than 20 transactions per second due to its structure. In Solana, another popular platform, there are about 2,000 transactions per second. Avalanche, on the other hand, is able to process more than 4,500 transactions per second.

As a result, many developers are switching to this network to create faster applications that are also relatively inexpensive. As a result, your users can spend less money on processing payments in their applications.

Indeed, the ecosystem is growing. Data shows that 65 applications are now based on Avalanche. These applications have managed to increase their total blocked token (TVL) value to more than $ 10 billion. That's remarkable growth considering Avalanche only launched a few months ago.

For example, Deloitte uses the Avalanche platform to improve its disaster recovery solutions. Tether also recently launched in Avalanche.

Central challenges

However, like most “Ethereum killers”, Avalanche faces three major challenges. First, the industry is becoming increasingly competitive and more and more platforms are running faster. For example, Kadena can process around 480,000 transactions per second.

Second, Ethereum holds a leading position in the industry. For example, its DeFi apps have a total blocked token value of more than $ 170 billion. Avalanche is trying to solve this challenge by paying developers to switch to its platform via Avalanche Rush.

Finally, there are also Layer 2 apps that are intended to help optimize the slow and expensive Ethereum blockchain. For example, developers can easily move their apps to a Layer 2 network like Polygon and see better speeds.

The four-hour chart shows that the AVAX price has recently been on an upward trend. Specifically, it is up more than 84% from its low since October. The coin is still slightly above the moving averages of the last 25 and 50 days.

On closer inspection, however, it shows that the price has formed a rising wedge pattern, which is shown in red. This is a similar pattern to what Bitcoin had before the current decline. Therefore, while the overall trend is up, the price is likely to take a small dip soon.

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