Avalanche’s native currency AVAX witnessed a significant acceleration in its token burn rate, with a notable instance where more than 31,650 tokens were incinerated within the last week. The peak of this activity was observed on February 24, accounting for over half of the total burns in the past 30 days. This marked increase comes after a period of relative consistency, where daily token burns fluctuated around 1,000 to 1,300.
Link Between Network Traffic and Burn Rate
The recent surge in token destruction aligns with increased network transactions. Reports from the Avalanche explorer suggest a potential strategy where all transaction fee revenues are being converted to burns. The relationship between network usage and burn rate implies that heightened activity could lead to a substantive reduction in AVAX supply, typically a bullish signal. However, contrary to expectations, the AVAX market did not exhibit an immediate positive response.
Market Sentiment and Technical Indicators
Market data from Coinglass indicates an 18% drop in open interest for AVAX futures within a ten-day frame. The long/short ratio for AVAX also remained below 1, hinting at bearish investor sentiment. Technical analysis of AVAX charts shows the Relative Strength Index failing to break the neutral 50 mark, suggesting potential resistance to an upward trend.
Further indicators like the Moving Average Convergence Divergence remain below the signal line, signaling a potential pullback. Nonetheless, some analysts are optimistic, forecasting a possible bullish crossover and subsequent rise in AVAX price. Despite the technical possibilities, AVAX suffered a 8.46% loss in value last week, dampening speculative interest.