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Avalanche is a highly scalable Layer 1 protocol that attempts to improve scalability without compromising decentralization or speed. Considered by many as an Ethereum competitor, Avalanche trumps Ethereum in terms of gas fees and has the capacity to process up to 6,500 transactions per second. However, because Avalanche uses the Ethereum Virtual Machine (EVM), it more so complements Ethereum than competes with it.
The native coin, AVAX, serves as the Avalanche ecosystem’s medium of exchange. AVAX powers the network, and it’s used to facilitate transactions on the network, distribute system rewards and participate in governance.
Avalanche is a fairly new project, launched in September 2020 by Ava Labs, a team based in New York.
Is Now a Good Time to Buy Avalanche?
Avalanche has been in a downward trend since its all-time high of $146.22 in November 2021, causing many retail investors to exit the market. Moreover, over the last few months, the cryptocurrency market has been rattled by negative events such as the Terra Ecosystem collapse, Celsius’ suspension of withdrawal and transfers and concerns of Three Arrow Capital becoming insolvent, all of which exacerbated the bleak trajectory for Avalanche and the broader cryptocurrency market. In June 2022, Avalanche was trading for less than $20, down over 80% from its all-time high. However, Avalanche is not alone in its descent. Bitcoin tumbled to $18,000 in June 2022, marking the first time in history in which Bitcoin traded below the previous cycle’s all-time high.
Nonetheless, while some see a fearful and somber market, others see a magnificent opportunity. In hindsight, times of unprecedented fear and pessimism often turn out to be extraordinary opportunities to accumulate an asset at fair prices. After all, a $19.60 AVAX is a lot more attractive than a $146.22 AVAX. As a result, if you are a believer in the long-term potential of Avalanche, right now could be a perfect time to start to scale into the market, albeit not without risk. Many high-quality Layer 1 projects are available, with Ethereum dominantly leading the charge.
How Long Will the Crypto Bear Market Last?
Bear markets refer to a period of time where trading volume is low, supply is greater than demand, prices are falling and investor confidence is extremely low. However, in contrast to traditional markets, cryptocurrencies are small and therefore inherently volatile. As a result, it is common to see prolonged and more volatile bear markets where 80% price drops are not out of the ordinary. For example, the 2014-2015 bear market lasted for almost 15 months.
Having lasted for 8 months and counting, the current bear market can be attributed to a variety of factors. Experts point to concerns over tighter monetary policy, rising inflation rates and the war in Ukraine as the primary drivers for slumping prices for risk-on assets such as cryptocurrency. Moreover, the cryptomarket has been following the stock market in recent months, which makes it even more intertwined with macroeconomic factors. Nonetheless, based on previous bear markets such as the 2012 or 2018 bear markets, many crypto natives are expecting the current bear market to last until late 2022 or early 2023.
Will Avalanche Ever Reach All-Time Highs?
When Avalanche reached an all-time high of roughly $146.22 in November 2021, Avalanche’s market capitalization reached a value roughly equal to $34 billion. To return to a market cap of $34 billion sometime in the near future, Avalanche’s price would need to reach a value of $120.53. However, this price is subject to decrease in the future as Avalanche’s circulating supply steadily increases.
In light of the current macroeconomic backdrop, it is unlikely that AVAX will reach all-time highs any time soon. Investor confidence continues to dwindle as concern that the global economy may enter a recession continues to grow. Moreover, other risk-on assets such as stocks are also underperforming, ultimately suggesting the current bearish climate is being driven by factors far bigger than the cryptocurrency industry.
Is Avalanche (AVAX) a Good Long-Term Investment?
Avalanche is a great investment choice for cryptocurrency investors wanting to hedge their bets against Ethereum and other Layer 1 projects. While Avalanche isn’t a top 10 cryptocurrency by market capitalization, it has a promising future and is one of the most scalable and popular Layer 1 protocols in the industry. As the crypto space continues to develop, so too will the demand for Layer 1 protocols. Layer 1 protocols are the underlying infrastructure for which other projects such as blockchain games are built on top of. Avalanche will continue to be valuable in the long-term only if developers choose to develop on the Avalanche blockchain instead of the vast range of other blockchains.
How to Buy Avalanche (AVAX)
AVAX can be traded on major exchanges such as Coinbase Global Inc. (NASDAQ: COIN), Gemini, Crypto.com, KuCoin and Binance US. Many of these platforms allow you to purchase AVAX using your credit card, through swapping features or through different trading pairs such as AVAX/USDT.
How to Store Avalanche Safely
Avalanche can be stored using a hardware wallet or a software wallet. A hardware wallet is widely regarded as the most secure way to store crypto. It keeps your private keys offline so that your crypto is inaccessible to anyone but the holder of the private keys. Ledger wallet is a great choice for a hardware wallet –– Ledger claims to provide the highest level of security for crypto assets.
Conversely, software wallets enable crypto holders to securely store their digital currencies and tokens in one place. These types of wallets allow users to buy, swap, lend and earn cryptocurrency in an efficient manner. The Coinbase Wallet is an example of a software wallet.
How Does Avalanche Fit in the Bigger Picture?
Avalanche is one of the most promising Ethereum (Layer 1) competitors in the cryptocurrency industry. Layer 1 refers to a base network, such as Ethereum, Bitcoin or BNB Chain and its underlying infrastructure. Layer 1 blockchains can finalize and validate transactions without the help of another network. They also have their own native token, which is used to pay transaction fees.
So, is Now A Good Time to Buy AVAX?
If you are a long-term investor, then it may be a great time to start building a position over the coming months. Avalanche as an asset is the same as it was two years ago; nothing has changed besides market sentiment. However, the current macroeconomic backdrop is still gloomy, which means that accumulating AVAX is risky. Further downside is more than likely in the short term. As a result, prudent investors will wait for signs of consolidation and a stabilization in prices before establishing positions.
FAQ - Frequently Asked Questions
Is now a good time to buy Avalanche?
If you are a long-term investor, then it may be a good time to start building an AVAX position over the coming months. Fearful environments often present greater opportunities to accumulate an asset before the hype picks back up.
Can Avalanche reach new all-time highs?
In light of the current macroeconomic backdrop, it is unlikely that AVAX will reach all-time highs any time soon. Investor confidence continues to dwindle as concern that the global economy may enter a recession continues to grow. Moreover, other risk-on assets such as stocks are also underperforming, ultimately suggesting the current bearish climate is being driven by factors far bigger than the cryptocurrency industry.
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