AVAX is trading below $65, but the network’s large DeFi ecosystem and use of DApps reflect its strong foundations.
Avalanche (AVAX) price is down over 30% in April, but despite negative price movement, the smart contract platform remains a top contender for decentralized applications due to its scalability, low-cost transactions, and its big footprint in the decentralized finance (DeFi) landscape.
The network supports the Ethereum Virtual Machine (EVM) and is unique in that it does not face the same operational bottlenecks of high transaction fees and network congestion.
Avalanche was able to amass over $9 billion in total value locked (TVL) by offering a layer1 proof-of-stake (PoS) scaling solution. This indicator is extremely relevant because it measures the deposits in the network’s smart contracts. For example, the BNB Chain, in operation since September 2020, has $10.4 billion in TVL.
Positive News Could Create Price Support
Although the price of the AVAX token has suffered and the TVL lags behind some of its peers, investors remain bullish, based on the fundamentally positive developments in April.
According to an April 14 report from Bloomberg, Ava Labs, the main developer of the Avalanche Blockchain, raised $350 million from investors. This deal valued the company at $5.25 billion, and according to data from DappRadar, Avalanche has almost 100 active applications, ranging from decentralized finance to non-fungible token (NFT) markets to gaming.
In early April, the organizations behind the Terra USD algorithmic stablecoin purchased a total of $200 million worth of AVAX for their Terra USD strategic reserves. Terra co-founder Do Kwon cited the strong growth of the Avalanche ecosystem and its large user base.
Even with the positive news, AVAX price is still 53% below its all-time high of $147, giving it a market cap of $18.4 billion. By comparison, the market capitalization of Terra (LUNA) is $31 billion, and Solana (SOL) has a total value of $33.3 billion.
Total Locked Value falls 10.5%, Downtrend of the entire Market Continues
The main metric for the Avalanche DApp has strengthened in the last 30 days, as the TVL of the network has rebounded to 121 million AVAX.
Avalanche DApp deposits peaked at 132.9 million AVAX on March 14 but dropped sharply in early April to the lowest level since January 3. As a result, the current TVL of $8.5 billion has dropped 10.5% in the last 30 days.
As a comparison, the TVL of Solana (SOL) decreased by 9.5% in the same period, reaching 4.8 billion dollars. Similarly, Ethereum smart contract deposits decreased from $88.3 billion to $80.1 billion in the same period, a 9% decrease.
To confirm whether the TVL drop in Avalanche is problematic, you need to look at DApp usage metrics. Some DApps, such as games and collectibles, do not require large deposits, so the TVL metric is irrelevant in those cases.
As DappRadar shows, on April 28, the number of Avalanche network addresses interacting with decentralized applications decreased by 14% from the previous month. By comparison, the Solana network saw a 60% increase in users, while Ethereum was flat.
Avalanche’s Strong DeFi Use Case Remains a Bullish Factor
Although Avalanche’s TVL has had the hardest time compared to other similar smart contract platforms, there is strong network usage in the DeFi segment. For example, Trader Joe’s 180,830 active addresses are higher than Ethereum’s leading DeFi app, MetaMask Swap, which has 116,210 active users.
The above data suggest that Avalanche holds its own against competing chains. Given that the price of AVAX plunged 29.5% in 28 days, investors should not panic as the decentralized application network released strong TVL and DApp usage data.
By Audy Castaneda
