Avalanche, warning of historic sell-off...downtrend continues due to Middle East fear

▲ Avalanche (AVAX)/ChatGPT generated image

Avalanche (AVAX) continues its price correction phase, pushed back from resistance levels due to escalating tensions in the Middle East and bearish signals in the derivatives market.

According to crypto media outlet FXStreet on April 23 (local time), Avalanche has extended its decline, trading below $9.30 as of Thursday, after being rejected from a major resistance zone. News that Iran fired upon three vessels in the Strait of Hormuz sharply dampened risk asset sentiment across the market. While Bitcoin (BTC) paused its upward trend around $77,800 and entered a wait-and-see mode, altcoins like Avalanche are showing a more vulnerable trend under relatively greater selling pressure.

Stagnant demand from institutional investors is also fueling the price decline. Inflows into Avalanche spot ETFs this week have virtually halted after last week's $5.26 million inflow. This indicates that institutions are reluctant to increase their exposure to Avalanche amidst growing uncertainty in the Middle East. Investors are maintaining a cash position and closely monitoring market direction in anticipation of potential additional geopolitical contingencies.

Derivatives indicators further reinforce the pessimistic outlook for Avalanche. The current long-short ratio for Avalanche is 0.84, approaching its lowest level in a month, indicating that traders are betting more on price declines. Furthermore, the weighted funding rate for open interest has turned negative at -0.0054%, technically proving that bearish forces are dominating the market. This signifies an entry into a phase where selling pressure overwhelmingly surpasses buying pressure.

From a technical analysis perspective, Avalanche remains below all major exponential moving averages, continuing its bearish momentum. The 50-day EMA at $9.41 and the 100-day EMA at $10.36 form strong resistance barriers overhead. The Relative Strength Index (RSI) is hovering below the neutral level of 50, and the Moving Average Convergence Divergence (MACD) has also slipped back into negative territory, warning of further downside potential.

For Avalanche to establish a foundation for a rebound, it must first decisively break above the Fibonacci 23.6% retracement level at $9.29 and the 50-day exponential moving average at $9.41. However, if it fails to surpass this zone, there is a high risk of it being pushed down to the horizontal support level of $8.39. If even the $8.39 level breaks and a daily close is formed below it, the price is expected to fall to the lows of the previous cycle, solidifying the downtrend further.

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