Avalanche (AVAX) is down 45% in 30 days and at the same time the total cryptocurrency market cap is down 29%.
Despite the recent slowdown, this decentralized application (DApp) platform remains one of the main competitors in the race for layers 1 and 2 and it ranks first in terms of smart contract deposits and active addresses. Yet the lackluster token price still has investors wondering if the network remains a “serious” competitor.
The sharp sell-off in risky assets caused AVAX to test the $14.80 support several times, while the current market capitalization stands at $4.8 billion. It’s also important to note that the network’s Total Value Locked (TVL) holds an impressive $3.2 billion.
For comparison, Solana (SOL) offers incredibly low network fees and holds a TVL of $2.1 billion. Still, the market capitalization of the SOL token stands at $12.9 billion, which is almost 3 times more than the valuation of Avalanche at the price level of $14.8.
The TVL indicator is extremely relevant as it measures deposits on network 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 market cap of the token stands at $3.5 billion.
In short, Avalanche seems heavily discounted considering how the market capitalization of similar networks greatly exceeds their respective TVL.
Total value locked increased, but number of users decreased
Avalanche’s main decentralized application metric strengthened over the past 60 days as the network’s TVL rose to 184 million AVAX tokens. This suggests that even when AVAX price crashed, investors did not withdraw the tokens from its decentralized applications.
In terms of AVAX tokens, the network’s TVL actually increased by 35% in two months. For comparison, Ethereum’s TVL increased by 10% in terms of Ether, while BNB Chain faced a reduction of 14% over the same period.
To confirm whether the increase in TVL in Avalanche is encouraging, traders should analyze DApp usage metrics. Some applications, such as games and marketplaces, do not require large deposits, so the metric is not relevant in those cases.
As shown by DappRadar, on June 21, the number of Avalanche network addresses interacting with decentralized applications decreased by 42% compared to the previous month. By comparison, the BNB channel faced a 16% decline in users, while Polygon was down 29%.
The price follows the fundamentals, which have fallen
Even though Avalanche’s TVL has outperformed competing Dapp networks, the decline in network usage is concerning. For example, Trader Joe’s 93,130 active addresses are smaller than Polygon’s main DeFi app, QuickSwap, which has 161,040 active users.
The above data suggests that Avalanche is in troubled waters and could explain why AVAX price plunged 45% in 30 days. Investors will likely remain skeptical of the $14.80 support until network usage metrics improve, especially the number of active addresses in DeFi.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of TSWT. Every investment and trading move involves risk. You should conduct your own research when making a decision.