Avalanche (AVAX) price recovered 30% while investors have been slightly more careful than necessary

Just like a rubber ball bounces after hitting the ground, Avalanche (AVAX) price is recovering from yesterday’s sharp drop. However, from an investor’s perspective, this may not be good news. Even so, AVAX investors seem to be more cautious about their investments, and this sentiment is especially higher than it should be. Why is that?

Avalanche and what else?

Avalanche’s total value locked (TVL) increased from $680 million to $2.79 billion in just about a month. This 310.3% increase in TVL has made Avalanche the sixth-largest DeFi blockchain in the world. In addition, the AVAX price has increased by nearly 113.62% month-on-month.


Avalanche 113% gain | Source: TradingView

It can be said that such growth makes investing in such assets an ideal choice. However, there are several other factors that one must consider before investing in altcoins like AVAX. First, Avalanche is one of the strongest performing names compared to other competitors in terms of network value. Surpassing big names like Polygon, Terra, and Binance Smart Chain, the project finds a foothold in the market.


Avalanche’s developer activity compared to its competitors | Source: Santiment

AVAX promises good returns when compared to a risk-free asset, thanks to a Sharpe ratio of 3.52. However, the behavioral psychology of investors could become a threat in maintaining AVAX prices at higher levels. To date, between 5 and 8 million AVAX has been sold due to price fluctuations, and a recent $11 million worth of liquidation has occurred. This is the highest the AVAX market has seen in the last five months. At times, such fluctuations raise the question of how prices can maintain steady growth.

Avalanche’s liquidations are at a 5-month high

Avalanche’s liquidations are at a 5-month high | Source: Coinalyze

Yesterday, AZCoin News reported that the DeFi Vee Finance platform operating on the Avalanche network was mined by hackers for $35 million. Accordingly, 8,804.7 ETH and 213.93 BTC were stolen. This can make new investors skeptical of the network. A few days earlier, the network received a $230 million investment to develop the DeFi market. And with the massive growth of the network, Avalanche’s success is only due sooner or later.

The AVAX price once rose as much as 12.05%, reaching an intraday high of $66.08. Its gains came as part of a temporary rally that began on Tuesday after it bottomed locally at a local low of $50.68. As a result, AVAX’s net recovery extended to 30.37%.


AVAX/USD 4-hour chart | Source: TradingView

Avalanche’s funding came against the backdrop of its top rival Ethereum’s ongoing network issues, including bandwidth congestion and higher transaction fees. The young blockchain project, which claims to process over 10,000 transactions per second (TPS) compared to Ethereum’s 13 TPS, already has more than 270 projects building atop its public ledger, including Tether, SushiSwap, Chainlink, Circle, and The Graph.

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