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Avalanche (AVAX) also affected: collapse of Terra could cause a drop to $15

 


Avalanche ( AVAX ) is the worst-performing coin among the top tokens over the last 24 hours. This is partly due to concerns surrounding Terra ( LUNA ) and its dying algorithmic stablecoin project TerraUSD (UST)

AVAX price is down 14 percent between May 18, when it was $35, and May 19, when it fell to $28.50. This drop coincided with a report by a South Korean news outlet claiming that Terraform Labs, the developer behind the Terra blockchain, owes the equivalent of about $78.5 million in debt to the local tax agency.



Three days earlier, Luna Foundation Guard (LFG), a non-profit subsidiary of TerraForms, made public that the organization held approximately 1.97 million AVAX tokens worth $58.39 million as of May 19 have reserves that should support the UST stablecoin.


In the same pool, LFG also holds Bitcoin ( BTC ), Binance Coin ( BNB ) and LUNA. The company has previously sold much of its holdings in a bid to rebound the UST value after it was " decoupled " from the US dollar.


LFG did not sell any AVAX. Still, the panic over the situation at Terra has caused the Avalanche token to plunge 50 percent when looking at its price action since the beginning of the month. On May 11 alone, there was a 30 percent drop.


Technical analysis forecasts further declines at AVAX

AVAX price could decline another 40 percent in May according to technical analysis as it breaks out of a bearish continuation pattern.


The so-called bear pennant occurs when price, after a sharp decline, consolidates in a range that lies between a falling trendline above and a rising trendline below. This pattern breaks up when price breaks below the lower trend line. Typically, the depth of the pullback is then determined by the length of the flagpole of the previous downtrend.


Due to the bear pennant, AVAX could drop to around $17 in May.

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