Avalanche (AVAX) Faces Downward Pressure as Long/Short Ratio Indicates Bearish Sentiment

• Avalanche is in a bearish limbo with confirmation from the Long and Short ratio.
• Avalanche Open Interest also depicts a visibly bearish sentiment.

Popular smart contract platform Avalanche has been experiencing downward movement in the price of its native token, AVAX, over the past month. This downward pressure is evidenced by bearish sentiments from AVAX’s Long/Short Ratio.

Sentiments for Avalanche Turns Bearish

Avalanche appears to have run out of luck after performing very well in 2023 and in the first quarter of 2024. According to our data, AVAX is trading at $32.16, demonstrating a decrease of 11.5% in the past week, and a 3.3% decrease in the past month. 

The market cap is now pegged at $12.6 billion, while trading volume is down by 10% to $367 million, indicating dwindling interest from investors.

The Long/Short Ratio, which measures traders’ expectations toward a cryptocurrency, expects a further decline for AVAX. This bearish forecast comes despite the token seeing a slight increase of 0.17% in the last 24 hours. A Long/Short Ratio value greater than 1, means there are more long than short holdings. On the other hand, a value less than 1, suggests increased bearish predictions. 

A short trader is one betting on a price decrease, whereas a long anticipates an increase in token price while filling a bid on a contract. According to recent data from Coinglass, AVAX’s Long/Short Ratio comes in at 0.79, which supports the market’s bearish perception.

Another metric aligning with the bearish sentiment on AVAX is the Open Interest (OI). It refers to the value of outstanding contracts in the market, decreasing or increasing based on net positioning. OI does not reveal whether there are more longs or more shorts, in contrast to the Long/Short Ratio. Rather, an increase in OI and liquidity is described as an increase in open contracts. A decline, however, points to a rise in closed positions and a greater outflow of cash.

At press time,  AVAX has $211.87 million in open interest, according to Coinglass data. Notably, Open Interest was much higher on June 7, when AVAX was trading for $35. Rather than providing an upward strength that a rise in Open Interest can provide, the fall in the token’s value could validate a downward trend.

Death Cross on the EMAs

Meanwhile, the 20-day Exponential Moving Average (EMA), another key indicator, has dipped below the 50-day EMA, forming a “death cross.” This technical pattern often precedes a price drop, suggesting a shift in momentum from bullish to bearish.

Furthermore, the Directional Movement Indicator (DMI) provides insights into trend strength and direction. A higher reading on the negative DMI (red line) compared to the positive DMI (blue line), as shown in a graph from TradingView suggests a downward bias. In AVAX’s case, the negative DMI currently sits higher, supporting the potential for a price decrease.

It’s important to remember that technical indicators are not absolute predictors of future price movements. As previously reported by Crypto News Flash, Avalanche is enhancing its market standing by tokenizing real-world assets. This is anticipated to fuel positive sentiments for AVAX.