The risk of a correction is rising after AVAX price surged 80% from the January low

The Avalanche (AVAX) rally enters its third week mainly after the top cryptocurrencies rallied.

On Thursday, AVAX surged nearly 16% to hit $96.5, its best level since January 14, 2022. The move comes during the January 22 rally after bottoming near $53. As a result, AVAX’s net recovery is over 80%.

Source: TradingView

Network growth offsets macroeconomic fears

The crypto market has been unusually bullish since early 2022 as investors weigh in on the prospect of monetary tightening by the US Federal Reserve (Fed). After hitting a record high of over $150 in November 2021, AVAX has lost up to 65% of its value in what many call the “crypto winter.”

Similarly, top coins like Bitcoin and ETH are down 52% and 57%, respectively, from their November 2021 record highs. But they recouped almost half of their losses after bottoming in late January 2022, helping other assets (including AVAX) recoup their losses.

AVAX price surged as Avalanche — as an independent blockchain project — reported massive network growth towards the end of 2021.

Notably, the number of daily active addresses increased to 70,000 in Q4, compared to 10,000 addresses per day in Q3, and a 714% increase in Total Locked Value (TVL) – the fastest growth among competitors Paintings belong to Layer 1 categories and Layer 2 – after the emergence of the leading protocols Aave and Curve in the Ethereum ecosystem.

Source: TradingView

Interestingly, the Avalanche network grew in the fourth quarter despite a decline in its net market valuation over the same period, suggesting that AVAX was merely reacting to the turmoil in the crypto space and global markets due to the Fed’s tightening statements.

But one report by Messari researchers Chase Devens and James Trautman say AVAX adoption will be higher in the upcoming quarterly sessions. The document references Avalanche Rush, a $180 million cash-reduction incentive program launched in August 2021, due to its ability to attract more participants to the network.

“While Avalanche Rush may continue to act as a catalyst for ecosystem growth, attracting more project launches and partnerships, significant technological advancements lie ahead.” The advancement will help the team develop Avalanche’s core platform and sustaining continued growth of the network is critical .”

AVAX Technical Outlook

AVAX’s recent move higher met a sell-off near multi-month descending trendline resistance on Tuesday.

In particular, this resistance is part of a descending channel. AVAX has been trending down within the channel since the start of a strong correction in late November 2021. Therefore, the probability looks higher that the token will continue to drop within the range of the current channel.

 Source: TradingView

A sustained pullback on a test of the channel’s upper trendline as resistance can push AVAX towards the temporary support at $86.5. The next glitch should bring the price back to $72.

Overall, however, downside target looks close to the channel’s lower trendline of around $57 on a pullback.

Conversely, a decisive move above the channel upper trendline can propel AVAX towards $104 as the next upside target and on a continuation of the upmove towards $135.

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