The Avalanche (AVAX) blockchain, a leading Proof-of-Stake ecosystem, has reported a significant decrease in its network usage. Over the previous week, there was a marked drop in the number of transactions on the network. This dip is seen as a potential concern for the platform, which aims to support robust and sustainable smart contract operations. The data suggests a lower engagement with decentralized applications (dApps) within the Avalanche ecosystem, hinting at a shift in user behavior or market dynamics. This report analyzes the implications of the transaction reduction and the underlying factors contributing to this trend.
Transaction Trends and Network Gas Consumption
Avalanche’s primary smart contract platform, the C-Chain, recorded 7.66 million transactions last week—a decrease of nearly 17% from the previous week. Alongside the drop in transactions, the network’s gas consumption also fell by around 2.7%. This decline in activity suggests a reduction in the use of complex smart contracts typically associated with higher gas costs.
Falling Daily Transactions and Potential Revenue Impact
Since reaching a peak in December during a period of high activity, daily transactions on the C-Chain have seen a steep decline. A graph depicting this trend shows a fall from over 5 million transactions to a low of 200,000 in early February. This reversal in fortunes hints at a cooling off period for the blockchain after a previously bullish phase in 2023. The decreased transaction volume may also be affecting Avalanche’s revenue from transaction fees.
Deflationary pressures on AVAX have similarly lessened, as indicated by data from Avascan showing a decline in the number of AVAX burned due to reduced transaction volume. This easing of deflationary activity is likely contributing to a 1.1% drop in the cryptocurrency‘s price over the week. Nonetheless, recent trends show a 4% price uptick for AVAX, accompanied by a significant increase in trading volume.
AVAX Futures and Market Sentiment
The bearish trend is further evidenced by data from Coinglass, which notes a decrease in the value locked in AVAX Futures Open Interest, coinciding with a drop in the spot price. The Open Interest in AVAX Futures has seen a 5% decline week-on-week. The growing number of short positions relative to long positions among investors supports this downtrend, signaling a market leaning towards bearish expectations for the AVAX token.