The bullish setup emerges as traders raise their upside bets on smart contract protocols that rival Ethereum.
Avalanche’s AVAX token looks poised to hit $80, as per a classic technical pattern, after hitting a new high of over $65 on Sept. 12.
Dubbed as a “bull flag,” the structure emerges as a brief sideways/downward trend following a strong price move higher. As a result, bull flags tend to look like downward sloping channels, represented by two parallel trendlines that trap the price action.
Additionally, a market’s underlying trade volume dries up as prices move lower, indicating weakness in the downtrend. Therefore, bull flags typically resolve following a break above their upper trendlines, with prices pushing as high as the previous uptrend’s height — i.e., “flagpole.”
AVAX’s price action since Aug. 17 has apprehensively led to the creation of a bull flag pattern.
The chart above shows the structure’s fruition, right from the $37-long uptrend (flagpole) to a downward sloping channel’s formation to an upside breakout. As a result, AVAX now looks to be targetting $80.
That is primarily because of a bull flag’s popular profit targets; analysts look for the price to break higher with a length equal to the flagpole’s size. Therefore, measuring from the breakout level ($45.64), the AVAX profit target comes to be around $82.
The setup appeared as the Avalanche token reached another record price level, hitting $66.47 for the first time, following a 618% rebound rally from its July 20 low of $9.25. Meanwhile, on a year-to-date timeframe, its gains are an astonishing 1,988%.
DeFi and NFT boom behind soaring AVAX
The rally in AVAX markets closely followed similar moves across tokens from smart contracts platforms that rival Ethereum, the leading public ledger behind the booming decentralized finance (DeFi) and nonfungible token (NFT) space.
But Ethereum's reign as the top smart contract protocol has come under challenge due to its expensive transaction costs and network congestion issues. As a result, the market has made space for so-called “Ethereum killers” like Solana, Cardano, Fantom, Avalanche and others.
For instance, the total value locked (TVL) inside the Solana ecosystem has jumped by 165% in the past seven days, according to DeFi Llama, while SOL/USD has jumped by over 42% in the same timeframe.
Similarly, Fantom’s TVL has soared 12.73%, with FTM/USD exchange rates rising by 39% in the last seven days. As for Avalanche, the TVL has spiked 0.5%, and AVAX/USD has risen by 41.10%.
In contrast, Ethereum’s TVL has declined by 22.69%, signaling liquidity migration to rivaling chains.
AVAX/USD started rallying particularly after the Avalanche Foundation launched its namesake DeFi incentive program on Aug. 18. The organization allocated $180 million to DeFi protocols that want to migrate from Ethereum to Avalanche.
Related: Avalanche Rush to give out more than 180M in DeFi incentives
Benqi, a decentralized non-custodial liquidity market protocol built atop Avalanche, received $3 million from the foundation’s grant.
Avalanche also witnessed growth in the NFT and DeFi projects looking to run atop its public ledger. That included a partnership with Topps, a collectible and trading card maker that employed the Avalanche blockchain to launch its “2021 Topps Major League Baseball Inception NFT Collection.”
Nonetheless, Ethereum remains the dominant force in the smart contract space. The project is undergoing major network upgrades to resolve its scalability and network fees issues by completely updating its core proof-of-work protocol to proof-of-stake by next year.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.
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