AVAX Traders Anticipate New ATH Even As Avalanche DApp Use Slows

Avalanche (AVAX) rose 43.8% between March 14 and March 31 to a daily close of $97.50, the highest level since January 5. This tier-1 scaling solution uses a proof-of-stake model and has deposited a total of $9 billion in collected value-locked (TVL) into the network’s smart contracts.

AVAX Token/USD at FTX. Source: TradingView

Subnet adoption fuels recent price rally

Some analysts attribute the rally to Avalanche’s stimulus program to accelerate subnet adoption, announced on March 9. According to the Avalanche Foundation, subnets enable features that are only possible with “network-level control and open experimentation.”

The program will allocate up to four million AVAX, worth approximately $340 million, to fund decentralized applications focused on gaming, non-fungible tokens (NFTs) and financial applications (DeFi).

Wes Cowan, director of DeFi at Valkyrie Investments, added that “Avalanche’s KYC infrastructure subnet will be a huge step forward for institutional adoption.”

Even with the good news, the AVAX price is still 33% below its all-time high of $147 and the token has a market cap of $26.3 billion. In comparison, the market cap of Terra (LUNA) stands at $38.1 billion and Solana (SOL) has a total value of $43.8 billion.

Avalanche is also compatible with Ethereum Virtual Machine (EVM) and is not plagued by the average $15 transaction fee and network congestion affecting the Ethereum network.

Related: Traders Predict $3,800 Ethereum, But Multiple Data Points Suggest Different

The use of Avalanche’s smart contracts is declining

Avalanche’s primary DApp metric started showing weakness in March after the network’s TVL dropped below 94 million AVAX.

Avalanche Total value locked, AVAX. Source: DefiLlama

The chart above shows how Avalanche’s DApp deposits peaked at 132.9 million AVAX on March 14, but fell dramatically to their lowest level since January 3. Dec 2021.

Meanwhile, Terra’s TVL is up 116% to $19.8 billion between January and March 2022. Similarly, Waves smart contract deposits rose from $730 million to $4.5 billion over the same period.

To confirm whether the TVL drop in Avalanche is troublesome, one needs to analyze DApp usage stats. Some DApps, such as games and collectibles, do not require large deposits, so the TVL stat is irrelevant in those cases.

Avalanche DApps 30 days of data. Source: DappRadar

As shown by DappRadar, on April 1, the number of Avalanche network addresses interacting with decentralized applications fell 16% from the previous month. In comparison, the Solana network experienced a 6% user increase, while Ethereum fell 11%.

While Avalanche’s TVL has been hit the hardest compared to comparable smart contract platforms, there is solid network usage in the decentralized financial (DeFi) segment.

The above data suggests that Avalanche is losing ground against competing chains. With AVAX up 43.8% in 17 days, some holders may feel uneasy if the decentralized application network continues to post weak TVL and DApp usage data.

The views and opinions expressed here are solely those of the writer and do not necessarily reflect the views of Coin-Crypto. Every investment and trading move involves risks. You should do your own research when making a decision.

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