Avalanche has had a lucrative week, gaining more than 25% over the past seven days. That had it take its market capitalization higher to $23 billion at this publication (Coinmarketcap data). Moreover, AVAX gained approximately 10% within the past 24 hours. Such developments raised eyebrows among market participants. Moreover, will the alt remain a profitable investment in the future?
Technical viewpoint shows AVAX in broad bearishness on its charts. That comes as the alt remains stuck within a descending triangle. Surprisingly, the alternative token displayed a lucrative recovery since March 15. Nevertheless, Avalanche is still inside the broad descending triangle. Therefore, the current conditions might mean a little ‘bull trap.’
Evaluating Avalanche’s previous rallies plus subsequent downswings since 2021 November and the Relative Strength Index within the timeframe displays a high correlation. Meanwhile, the descending triangle formation emerged as prices created lower peaks. Moreover, all minor gains remained capped at the 60-65 mark on the Relative Strength Index.
That way, the current RSI at 61 might witness a drop soon. Avalanche has on-chain metrics presenting mixed signals. Messari data show AVAX noted an increase in market cap dominance lately, promising well for the near term. The alt topped all previous rallies, suggesting impressive market strength in the coming sessions.
Moreover, Avascan.info data indicates AVAX has recorded increasing burning fees, a positive signal. Token burning removes cons in the circulating supply, making the asset deflationary. That happens since it directly impacts the coin’s supply and demand dynamics.
Despite that, some indicators show that Avalanche s not prepared to go long. The alt’s Sharpe ratio has dropped over the past couple of months, currently hovering at 0.73. I even hit -6 towards January-end. Such narratives show long positions around these territories might be fatal.
Furthermore, Santiment data shows Avalanche’s developmental activity has stagnated for some time, an unhealthy signal for the token’s price movements soon.
So, despite AVAX showing promising moves, it remains stuck with poor sentiments that engulfed the broad marketplace since December 2021. That way, Avalanche might be in a potential ‘bull trap,’ and long investors may consider avoiding the alt at the moment.
