AVAX, the native token of the Avalanche network, entered the cryptocurrency market prominently earlier this year, establishing itself as a prominent player and outperforming many other altcoins.
But the initial enthusiasm surrounding AVAX took a noticeable turn as the narrative took an unexpected turn. The token is currently sitting at $36.65, reflecting a significant change from its previous bullish trajectory. Over the past seven days, AVAX has had a difficult time, suffering a loss of 15%.
Concerns and social silence due to AVAX downturn
The reasons for the recent downturn could range from changes in market sentiment to external factors influencing broader cryptocurrency trends. Investors and market analysts are closely monitoring the situation to understand the underlying dynamics and determine whether this is a temporary correction or indicative of a more persistent trend.
Moreover, an interesting example emerges of shrinking social scale. Despite AVAX’s resilience, online chatter surrounding the platform has grown rapidly, raising questions about the coin’s sustainability.
Declining social volume could suggest a gap between market performance and investor sentiment, which could trigger closer scrutiny of the factors affecting the value of a cryptocurrency and its perception within the community.
However, on a positive note, Avalanche’s market capitalization has increased by more than 5% in the past few days, which means it has attracted more investor inflows.
AVAX market cap currently at $12.647 billion. Chart: TradingView.com
Not long after Grayscale’s Digital Large Cap Fund adopted layer 1 blockchain, Avalanche made a strong comeback. With billions of cryptocurrency assets under management, Grayscale is one of the largest digital asset managers.
The inclusion of AVAX in Grayscale’s fund indicates that institutions will remain interested in the Avalanche beyond 2024.
Meanwhile, the Avalanche’s circulating supply declined significantly in late 2023 due to the surge in activity surrounding the “inscription.”
Avalanche Surge: Celebrating a Record-Breaking Token Burn
The creation of data on these chains incurs transaction fees, which are permanently removed from circulation through the network’s burn mechanism.
Source: AVASCAN
In December alone, a record 195,000 tokens were burned, proving the growing popularity of Avalanche inscriptions.
Experts attribute this trend to several factors. Inscription-based transactions, initially popular in Bitcoin, are finding new life in Avalanche due to their creative potential and contribution to the burn mechanism.
This creates a positive feedback loop, attracting users and further reducing circulating supply. Additionally, the increase in inscription activity suggests that the Avalanche community is growing and engaging, which bodes well for the long-term health of the network.
But the impact of this trend is subtle. While the token shortage could cause the value of AVAX to increase over time, similar to Bitcoin, it also raises concerns about rising transaction fees and potential centralization if a large inscription project controls a significant portion of the fee pool.
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Source: NewsBTC.com