Avalanche's AVAX token dropped nearly 5% in the past 24 hours, marking one of the steepest falls among top cryptocurrencies by market cap. Prices sank below the critical $6.50 support level while open interest unexpectedly rose, signaling increasing short positions amid a bearish market mood.
Price Trends and Market Dynamics
AVAX struggled to gain traction around the $7 mark in recent weeks, despite a 20-fold increase in daily on-chain transactions. The persistent downtrend was accentuated by Bitcoin’s recent dip below its $65,500 support, which could fuel further selling pressure on altcoins like Avalanche. Technical analysis reveals the formation of a bearish swing structure on the 12-hour chart, with AVAX failing to reclaim the $7.08 swing high tested in early July. The token has oscillated between $6.38 and $6.78 over two weeks, but the recent break below $6.40 suggests a possible acceleration of the downtrend toward $6.00 or lower.
Short-Selling and Potential Market Reversals
Data from Coinalyze highlights growing short interest, reflecting traders' bearish sentiment. This uptick in open interest alongside falling prices points to increased activity in derivatives markets, with funding rates turning negative. However, the 2-week liquidation map from CoinGlass reveals densely clustered short liquidations between $6.70 and $6.85. This zone could act as a temporary price magnet, triggering a short squeeze that pushes AVAX upward before resuming the downward trend. Given this, traders might keep a bearish stance but prepare for sudden volatility due to potential short-covering.
This analysis is for informational purposes and does not constitute financial advice.
