Avalanche (AVAX) is down 45% in 30 days while the total cryptocurrency market cap has shrunk by 29%.
Despite the recent downturn, this decentralized application (DApp) platform remains a top contender in the Layer1 and Layer2 race and ranks high in terms of smart contract deposits and active addresses. However, the lackluster token price is still causing investors to reconsider whether the network remains a “serious” competitor.
The brutal sell-off in risky assets prompted AVAX to repeatedly test the $14.80 support while the current market cap stands at $4.8 billion. It’s also important to note that the network’s Total Value Locked (TVL) is an impressive $3.2 billion.
For comparison, Solana (SOL) offers incredibly low network fees and has a TVL of $2.1 billion. However, the market cap of SOL token is $12.9 billion, which is almost three times the valuation of Avalanche at the $14.8 price level.
The TVL indicator is extremely relevant as it measures deposits into the network’s smart contracts. If we use Polygon (MATIC), an Ethereum Layer 2 solution, as a proxy, the network holds a TVL of $1.8 billion, while the token’s market cap is $3.5 billion.
In short, Avalanche looks heavily discounted considering the market caps of similar networks far exceed their respective TVLs.
The total blocked increased, but the number of users decreased
Avalanche’s primary decentralized application metric has strengthened over the past 60 days as the network’s TVL jumped to 184 million AVAX tokens. This suggests that even when AVAX price crashed, investors did not withdraw tokens from its decentralized applications.
In terms of AVAX tokens, the network’s TVL has effectively grown by 35% in two months. For comparison, Ethereum’s TVL increased by 10% in ether terms, while BNB Chain suffered a 14% decline over the same period.
To confirm whether Avalanche’s TVL increase is encouraging, traders should analyze DApp usage metrics. Some applications, like games and marketplaces, don’t require large deposits, so the metric is irrelevant in those cases.
As shown by DappRadar, the number of Avalanche network addresses interacting with decentralized applications decreased by 42% on June 21 compared to the previous month. In comparison, the BNB chain saw a 16% drop in users, while Polygon declined 29%.
The price follows the fundamentals, which have gone down
Although Avalanche’s TVL has outperformed competing dapp networks, the decline in network usage is worrying. For example, Trader Joe’s 93,130 active addresses are smaller than Polygon’s leading DeFi application, QuickSwap, which has 161,040 active users.
The data above suggests that Avalanche is in choppy waters and could explain why AVAX price is down 45% in 30 days. Investors are likely to remain skeptical of the $14.80 support until network usage metrics improve, specifically the number of active addresses in DeFi.
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