Cryptocurrency Market Round-Up

Typically, cryptocurrencies are termed as digital currencies and use blockchain technology to record every transaction. Avalanche (AVAX) is a blockchain network and decentralised applications platform. It consists of three distinct blockchains, XChain, C-Chain, and P-Chain, each of which serves a particular function. AVAX has a market capitalization of ~USD 3.26 billion (as per TradingView as of October 12, 2023).

Last week, the benchmark S&P Cryptocurrency Broad Digital Market (BDM) Index started on a positive note and maintained bullish momentum for the entire week. The index gained by 43.25 points (~2.25%) to 1967.98 for the week ending October 06, 2023. In the current week starting October 09, 2023, the index is trading with negative momentum. Moreover, other major cryptocurrencies, such as Bitcoin and Ethereum, are witnessing bearish momentum for the current week.

Having understood the S&P Cryptocurrency BDM Index movement over the last week and the scenario for the upcoming week, one cryptocurrency that seems ‘Non-Attractive’ at the current level appears to be Avalanche (AVAX) Perpetual Futures based on the below technical parameters: -

Avalanche (AVAX) Perpetual Futures:

Noted below are the generic insights, indicative entry price, support levels, and resistance for the next 1-2 weeks duration for the AVAX:

Entry level and support Levels as mentioned herein are only indicative in nature as per trend analysis and further evaluation is required when looking at cryptocurrency under discussion.

Note: The reference Information in this report has been sourced from TradingView.

AVAX Technical Analysis Summary (On the Daily Chart):

On the daily Chart, AVAX’s prices are trading below the falling trend line resistance zone at the USD 10.10 level and continuously facing resistance from the trendline, indicating negative biasness in the price action. Moreover, the prices are trading below the trend-following indicators 50-period & 21-period SMAs, indicating downside momentum in the cryptocurrency. Further, the leading indicator RSI (14-period) is showing a reading of ~42.21 level, indicating negative momentum.

The momentum indicator MACD histogram is trading below the centerline, supporting a negative stance. Moreover, the prices are trading below the Parabolic SAR indicator, which may act as a resistance level. Now the next support level appears to be at USD 7.90, and prices may test this level in the coming sessions (1-2 weeks).

Noted below are the key positives and negatives when looking at Avalanche (AVAX) in the cryptocurrency space: -

Advantages of AVAX:

• Faster Transactions: With three chain structures - X-Chain, C-Chain, and P-Chain, Avalanche speeds up the transaction compared to much lower transactions per second using other cryptocurrencies.
• Smart Contracts: Self-executing contracts that allow buyers and sellers to automatically input their terms of the agreement. Users also lend and mine coins using C-Chain.

Disadvantages of AVAX:

• Limited Supply: Avalanche coin’s (AVAX) supply is limited which may create scarcity and a price bubble. The AVAX reward that is paid to developers is later burnt to reduce the quantum of coins.
• Conflicting Transactions: AVAX uses consensus to reach conclusions. A significant number of blocks may trigger false cross chains and validators may accept the invalid transactions and the rest of the network may refuse to honor the transactions which may stall the contract.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, Avalanche (AVAX) perpetual futures may witness movement in the downside direction. The currency looks ‘Non-Attractive’ and might witness correction given the current price of USD 9.12 (as on October 12, 2023, at 07:40 PM, (GMT+11) Time in Sydney NSW, Australia. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while making investment decisions.

Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the cryptocurrency has not been considered in the decision-making process. Other factors which could impact the cryptocurrency prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: When a Cryptocurrency price is expected to move upward in the short-term (1-2 weeks), it is termed as 'Attractive’, while if a downward movement in prices is expected in a Cryptocurrency it is termed as 'Non-Attractive'. In general, for an ‘Attractive’ cryptocurrency an exit position can be considered if the Resistance Levels or Indicative Stop loss mentioned as per the technical analysis has been achieved. If the cryptocurrency looks ‘Non-attractive’ an exit position can be considered if the Support Levels or Indicative Stop loss mentioned as per the technical analysis has been achieved. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report.

Note 2: How to Read the Chart?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50-period SMA. SMA helps to identify existing price trends and if the prices trade above the 21-period and 50-period SMA, then in general it shows an uptrend trend.

The Black colour line in the chart’s lower segment is a 14-period Relative Strength Index (RSI) which indicates momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the Cryptocurrency. The volume is the quantity that changed hands during the given period. Cryptocurrencies with high volumes are more liquid compared to lesser once and higher volumes help in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the Cryptocurrency prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the Cryptocurrency and if the price breaches the level, then Support 2 may act as the crucial support level for the Cryptocurrency. 

Resistance: A level at which the Cryptocurrency prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the Cryptocurrency and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the Cryptocurrency. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the Cryptocurrency prices. 

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. It is suggested to Trail the Stop-Loss as per the aforementioned levels if the Cryptocurrency price achieves more than 60% of the Resistance 1. individuals, in general, might consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of Resistance 1. However, these indications need further evaluation basis associated risks and any change in trends.

The reference date for all price data, currency, technical indicators, support, and resistance levels is October 12, 2023 at 07:40 pm, (GMT+11) Time in Sydney NSW, Australia. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individuals. Technical reports in general chart out metrics that may be assessed by individuals before any Cryptocurrency evaluation. The above are illustrative analytical factors used for evaluating the Cryptocurrency; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer -

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