Avalanche (AVAX) is down 45% in 30 days, while the total cryptocurrency market cap has lost 29%.
Despite the recent downturn, this decentralized application (DApp) platform remains a top contender in the layer1 and layer2 race and ranks high in smart contract deposits and active addresses. However, depressed token prices still have investors rethinking whether the network is still a “serious” competitor.
The brutal sell-off in risk assets has led AVAX to test support at $14.80 multiple times, compared to its current market cap of $4.8 billion. It’s also important to note that the network has an impressive $3.2 billion in total value locked (TVL).
For comparison, Solana (SOL) offers extremely low network fees and has a TVL of $2.1 billion. However, the SOL token has a market cap of $12.9 billion, which is almost 3x Avalanche’s valuation at the $14.8 price level.
The TVL metric is very relevant because it measures deposits to network smart contracts. If we use the Ethereum layer 2 solution Polygon (MATIC) as a proxy, the network has $1.8 billion in TVL and the token has a market cap of $3.5 billion.
In short, Avalanche looks like a deep discount considering the market caps of similar networks significantly exceed their respective TVLs.
Total locked value increased, but user numbers decreased
Avalanche’s main DApp metrics have strengthened over the past 60 days as the network’s TVL jumped to 184 million AVAX tokens. This suggests that even as AVAX prices plummeted, investors were not withdrawing tokens from its DApps.
In the case of AVAX tokens, the network’s TVL has effectively increased by 35% in two months. In contrast, Ethereum’s TVL increased by 10% in Ether terms, while BNB Chain decreased by 14% over the same period.
To confirm whether Avalanche’s increase in TVL is encouraging, traders should analyze DApp usage metrics. Some applications, such as games and markets, do not require large deposits, so this metric is irrelevant in these cases.
According to DappRadar, on June 21, the number of Avalanche network addresses interacting with decentralized applications was down 42% from the previous month. In comparison, BNB Chain has 16% fewer users, and Polygon has 29% fewer users.
Prices follow fundamentals that have fallen
While Avalanche’s TVL has outperformed rival Dapp networks, the decline in network usage is worrying. For example, Trader Joe’s 93,130 active addresses is smaller than Polygon’s leading DeFi app, QuickSwap, which has 161,040 active users.
The above data suggests that Avalanche is in trouble, which may explain why the AVAX price plummeted 45% in 30 days. Investors may be skeptical of the $14.80 support until network usage metrics improve, especially the number of active addresses in DeFi.
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