Just like a rubber ball bounces off the ground after hitting the ground, Avalanche (AVAX) price is recovering from yesterday’s sharp decline. However, this may not be good news from an investor’s perspective. Even so, AVAX investors appear to be more cautious about their investments, and that sentiment is especially higher than it should be. Why is that?

Through today’s post Bitcoin magazine Here are some factors investors should consider as to why they should and shouldn’t be investing in one of the largest DeFi tokens right now.

Avalanche and what else?

In just about a month, Avalanche’s Total Locked Value (TVL) rose from $ 680 million to $ 2.79 billion. This 310.3% increase in TVL has made Avalanche the sixth largest DeFi blockchain in the world. In addition, the AVAX price is up almost 113.62% compared to the previous month.

It can be said that this tremendous growth makes the property an ideal investment choice. However, there are several other factors that investors need to consider before investing in altcoins like AVAX.

Discount structure

First, the AVAX / USD rally could reach a fatigue point as it forms a textbook bearish pattern.

This structure is known as the rising wedge and occurs when price consolidates between falling support and resistance trend lines that attempt to converge at a later date. Rising wedges are usually bearish reversal patterns with price targets equal to the maximum height of the structure.

AVAX price appears to be oscillating within a rising wedge, with the maximum net distance between the structure’s upper and lower trendlines being $ 19.51.

1D AVAX / USD price chart with increasing wedge setup. Source: TradingView

Depending on the breakout point, the AVAX / USD wedge target could be at $ 19.51. The above chart assumes two breakout levels based on their historical significance as support and resistance. Therefore, Avalanche risks a drop in the $ 42.3 to $ 58.69 range in the upcoming sessions.

Base factor

In terms of network value, Avalanche is one of the top performing names when compared to other competitors. The project surpasses big names like Polygon, Terra and Binance Smart Chain and is finding a foothold in the market.

Avalanche Developer Performance Compared to Competitors | Source: Santiment

Thanks to a Sharpe ratio of 3.52, AVAX promises good returns compared to a risk-free asset. However, investor behavioral psychology could become a threat if AVAX prices are held at higher levels. To date, between $ 5 million and $ 8 million of AVAX has been sold due to price fluctuations, and recently there was a $ 11 million liquidation. This is the highest value the AVAX market has seen in the past 5 months.

Sometimes such fluctuations raise the question of how price can maintain steady growth.

Avalanche liquidation at 5-month high | Source: Coinalyze

Just yesterday Bitcoin magazine reported that the DeFi Vee Finance platform operated on the Avalanche network was mined by hackers for $ 35 million, of which 8,804.7 ETH and 213.93 BTC were stolen. This can make new investors skeptical of the network. A few days earlier, Avalanche had just received a $ 230 million investment to develop the DeFi market. And with the massive growth of the network, AVAX’s success was only a matter of time.

Hence, you can consider the above factors and make an informed decision about whether to invest or not!

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