Avalanche (AVAX) Dips After Hitting Monthly High — More Selloffs Ahead?

Avalanche (AVAX) is exhibiting signs of a bearish reversal after dipping by over 5% from its recently established monthly high of around $33. This correction risks triggering a full-fledged breakdown scenario due to two key factors: AVAX’s prevailing bear flag pattern and its massive token unlock in August.

AVAX Flag Pattern Suggests 40% Correction by August

Avalanche’s price will likely decline by over 40% in the coming weeks due to its maturing bear flag pattern.

A bear flag is a continuation pattern characterized by a steep decline followed by a consolidation phase that forms a rectangular shape against the prevailing trend. The pattern completes when the price breaks below the lower trendline, and drops by as much as the height of the previous downtrend.

As of July 23, AVAX was correcting after testing the flag’s upper trendline, which coincides with the 0.236 Fibonacci retracement line and the 200-day exponential moving average (200-day EMA; the blue wave).

The initial downside target for AVAX is its bear flag’s lower trendline at around $29.35. Meanwhile, a breakdown below the lower trendline, if accompanying a rise in trading volumes, will likely trigger the breakdown scenario, with the target being at around $18.20, down by over 40% from the current price level.

Conversely, a clear breakout above the upper trendline will likely invalidate the bear flag pattern, setting AVAX toward the $38-42 region instead. The core bullish fundamental that supports such an upside outlook is Donald Trump’s keynote at the Bitcoin 2024 conference on July 27.

Many analysts predict that Trump will promise a Bitcoin reserve policy for the United States if he is elected president in November.

Avalance Fundamental Analysis: 9.54 million AVAX Token to Unlock in August

The upcoming unlocking of over 9.54 million AVAX tokens on August 20 is another bearish catalyst.

Historically, such unlocks have led to increased selling pressure, primarily because token unlocks can flood the market with a large supply of tokens. This leads to increased selling pressure and potential price declines.

The last significant unlock on May 22 resulted in a nearly 50% price decline, raising concerns about a similar impact this time.

The historical context of AVAX’s price drop following the previous unlock highlights the risk associated with the upcoming event on August 20.