- AVAX recently breached a key support level and now faces the risk of forming lower lows.
- The decline intensified after a massive AVAX sell-off occurred in the last 24 hours.
Avalanche’s [AVAX] 7.16% drop in the past week is likely to extend due to the bearish price action on the chart and major liquidity outflows.
The altcoin has recorded a 4.60% decline in the past 24 hours. However, analysis suggests this is temporary, as it could be a retracement before another leg down.
With growing selling sentiment, AMBCrypto analyzes the possible price action for this asset and the direction it could trend.
Liquidity withdrawal adds to AVAX’s risk
At the time of writing, there has been a massive outflow of liquidity from the AVAX chain. Sentiment turned bearish, contrary to the project’s bullish outlook.
Data from Artemis shows that in the past 24 hours, a total of $3.9 million in net outflows occurred, indicating how much AVAX was withdrawn from the chain.
Source: Artemis
Liquidity withdrawals like this suggest that investors are moving their crypto into safer asset classes, such as stablecoins, to avoid further losses.
This outflow coincides with AVAX breaching a neckline support at $22.87, which was expected to act as a catalyst for a major rally. Failing to do so, AVAX formed a classic bearish head and shoulders pattern.
This pattern typically leads to a massive price drop once the support level is breached—a move AVAX has played out perfectly.
Analysis shows that AVAX could decline to the nearest support level at $14.40, a 27.46% drop from its current level.
Source: TradingView
With AVAX’s upward movement in the past 24 hours, AMBCrypto conducted further analysis to determine whether a bearish continuation or an upswing is on the horizon.
Bearish continuation on the edge
Using technical indicators like the Relative Strength Index (RSI) and Bull Bear Power (BBP), AMBCrypto confirmed that a bearish continuation is more likely.
At the time of analysis, the RSI was seen making gradual highs on an ascending line. Typically, this type of movement suggests an impending breakdown. If this occurs, it would further drive a decline.
Source: TradingView
To confirm the likelihood of a fall, AMBCrypto analyzed the Bull Bear Power indicator, revealing the formation of a bearish histogram. This indicates that bears—sellers—are in control.
The divergence between the RSI and BBP suggests a decline is imminent, especially if bearish dominance persists.
