- Avalanche retested the $16 support zone and bounced higher.
- Despite the bounce and the rising on-chain activity, long-term bulls might not be rewarded in the coming weeks.
Avalanche [AVAX] has been in a downtrend since the 11th of June. It fell by 26% in under two weeks, but began its recovery on Monday with a 9.26% rally.
Recently, it was reported that smart money investors were at a profit and continued to hold their AVAX.
Meanwhile, retail investors have begun to take profits, and derivative retail traders have started betting on short positions.
The on-chain activity has begun to increase substantially over the past few days. It did not match the highs made in April, but the uptick in activity was encouraging.
The 7-day active addresses change was at 204% at the time of writing.
Sustained activity could drive demand for Avalanche and potentially aid its recovery. The price action also hinted at a potential bullish reversal.
Profits for traders?
Source: AVAX/USDT on TradingView
The range (white) extended from $16 to $22.9, with its mid-range level at $19.5. The recent losses saw a retest of the range lows, which had previously been defended as support in April and March.
The bulls won the battle again, and it appeared likely that AVAX would climb to the $19.6 mid-range resistance.
However, the technical indicators remained bearish. The Awesome Oscillator continued to reflect bearish momentum, and the OBV was below its early May low.
This indicated that selling pressure had the upper hand.
If the daily trading volume remains below average in the coming days as Avalanche moves toward $19.5, traders should prepare for a rejection at the mid-range resistance.
While the 1-day chart showed a range formation and potential for a move to $22.9, it must be recognized that Avalanche was trading a long way south of where it had been in December 2024.
The drop from $54 in December to $18.1 at the time of writing represented a 66.3% price drop in six months.
The Global In/Out of the Money metric showed that 65.95% of holders were out of the money, and 27.18% were at the money. This meant that there were large numbers of holders willing to exit the market at break-even.
Even if Avalanche can rally, the number of sellers willing to exit the market would remain high, since many were holding losses right now.
Given the weak sentiment around most altcoins, it appeared that Avalanche investors should remain cautious until the Bitcoin dominance began to plunge, and capital rotation into altcoins began to take place.
