Avalanche Hidden Leverage Fuel - AVAX Crypto Analysis

[00:00:00]There are two proper reasons to be bullish for Avalanche. The first one is that FIFA is integrating with a blockchain to fight scammers, to fight ticket scalpers. The second reason is that the AVax ETF, so the exchange-traded fund, sees more and more demand of the token, as in Wall Street is buying Avalanche. So, is this potentially an opportunity? Here's the news around the ETF, and here's the news around FIFA you're using Avalanche for ticket sales. Are we potentially early buying AVax at the current prices? Let's have a look at the on-chain data. Let's see who's buying and selling here. Let's also see how much the blockchain is used long-term. Hi, my name is Gerhard. I've been in the crypto space for the last 8 years. I hit my first million 3 years ago, and I did this mainly through active trading of altcoins. My track record is on the website linked down below. In the last 2 years, I started to publish my trades in real time. With the current open trades, we are at an all-time high, and annualized, we are at 47%.

[00:01:00]The current open positions are, of course, part for the premium membership, but all the closed positions, they can be seen directly here on the website.

[00:01:07]You can verify everything yourself. I don't see many other people here on YouTube that are as transparent about their trading. Now, here's the price of Avalanche long-term in US dollars, and this is not pretty. We used to be above $100, now we are close to $6. Relative to the rest of the altcoin market, so that's now AVax divided by others.

[00:01:28]Others is the market cap of all the altcoins that are not in the top 10. The underperformance is even more consistent. What about AVax relative to Bitcoin? That's this chart over here. A very clear trend. It's all fundamentally the question is always about opportunity cost. Should we get into a more risky altcoin if that risk does not get compensated by more performance long-term? Now, what happened in the past does not necessarily have to happen in the future. What's the reason why AVax went down? It is token inflation.

[00:01:59]As in more and more tokens hit the market and early investors and the team and insiders and also airdrops, they long-term depressed the price. Now, you can see that relatively speaking, so in ratios, the token inflation was way worse at the beginning compared to where it will be in the future. This here is the token issuance over the next years.

[00:02:22]And this is the same data in table form as then we can expect a close to 10% supply expansion over the next 12 months. Now, Bitcoin has a supply expansion of 0.8%. So, this is definitely much higher. But the question is, can Avalanche potentially grow faster than Bitcoin given that it's much smaller? By the way, if you use x.com, formerly known as Twitter, then feel free to also check out the account of this channel. I publish various data points on many cryptocurrencies regularly over here. Make sure that you follow the right account though. So, that's @Bitcoin Stache. Please do not follow a scammer. Please do not follow an impersonator. It's only @Bitcoin Stache. That's the right account. So, the question with Avalanche as a chain is, will it grow in adoption going forward? What we see over here, that's the total value locked. So, the capital that's on the AVAX chain. And that peaked at close to $12 billion at the height of DeFi summer. And since then, it fell all the way down to less than $500 million.

[00:03:23]So, a drop of 95% roughly. And recently, it doesn't look that much better, right? The trend is not our friend right now. Here's the same total value locked measured in AVAX tokens. So, we could make the argument that maybe the TVL in US dollars just went down because AVAX itself went down.

[00:03:42]But measured in AVAX tokens, the growth isn't really that impressive either.

[00:03:47]Now, capital is just one of many metrics. In the end, we want to see adoption. We want to see many wallets, many retail people using the chain long-term. And yes, we are in a crypto winter, and yes, there is less usage across all chains, but what's going on with AVAX looks even worse compared to the rest of the market. As in, in the past, we had up to 20,000 active addresses on a given day. And now, that dropped down to below 1,000. If you were to create a bot using AI that suddenly trades AVAX back and forth, you might be able to push up this chart significantly without too much cost. And that might potentially make headlines. And there you go, you would be manipulating a cryptocurrency worth $2.6 billion.

[00:04:34]The social attention on AVAX is rather declining. And just have a look at this, how much social attention and price correlates. When everybody looks at a particular cryptocurrency, it tends to go up because most people tend to buy.

[00:04:48]They don't bet on falling prices. When there's less attention, or when attention moves to the next asset, that's also when the price tends to fall. The price is the line, the bar chart, that's the number of social mentions per month. So, that's across various platforms, YouTube, Twitter, etc. So, short-term, the price discovery happens 100% through leveraged bets. As in, on the spot market, we had 47 million worth of trading volume in the last 24 hours. On the perpetual futures market, we had 189. This is a quite common ratio, so roughly 1 to 3, 1 to 4.

[00:05:21]And the reason why the perps tend to be more active is because the trading fees on them are lower compared to spot. Now, the funding rate for AVAX is relatively neutral. It used to be very positive in the past, as in, there were more people that were betting on rising prices than on falling prices, but over the last 2 years, the market in general is not that optimistic anymore. And that, of course, also gets reflected in the price development. Trading volume is relatively low, and so is open interest.

[00:05:48]And that's maybe the silver lining. If there was suddenly some big news around AVX, then that could mean more bets on the price, and that could also push up the price itself. Right, when there's more leverage, when there are more bets on the price, then the fundamental AVX price tends to go up as well. There is a connection here between the levered bets and the spot market. There are arbitrage bots that trade between those two markets. Now, I have run a backtest on how to trade Avalanche. I like to do this with pretty much any altcoin.

[00:06:18]That's how I determine when to enter and when to exit. And this here finds out the best combination of moving averages.

[00:06:24]So, we try to figure out when do we get a golden cross, when do we get a death cross, when should we buy, when should we sell. The slow moving average is on the x-axis, the fast moving average is on the y-axis, and this looks at 40,000 combinations. And the best combinations for Avalanche are over here. So, what does that mean in numbers? It's the 9-day simple moving average and 16-day simple moving average. That then leads to a performance that's more than 200% per annum versus just buying and holding, which resulted in close to break-even return. How consistent is that performance, though? That's in this chart over here. At the top, we've got the Avalanche price. In the middle, we've got the return in US dollars versus Avalanche in gray. And at the bottom, we've got the return measured in AVX tokens. So, pretty much every year, we do outperform just buying and holding AVX directly. And again, the strategy is rather straightforward. So, we want to buy whenever we get a golden cross. When the 9-day simple moving average goes above the 16-day moving average. We want to sell whenever you get a death cross.

[00:07:29]So, for example, here on the 19th of May. That would have been a terrific time to sell because subsequently, the AVX price went from $9 down to $6. And so, we are getting closer to a potential golden cross. We haven't seen the golden cross yet, but it's very useful to just look at those two moving averages because again, historically they worked incredibly well. And this is in general how I trade crypto assets. I look for trading rules that historically worked well in the past and then I look for death crosses and for golden crosses.

[00:07:59]And so for example, when we bet on Terra Luna, right on the Luna classic token, we did the same kind of backtest for that. It was the 6-day and the 10-day simple moving average. We got a death cross over here and then subsequently when we closed that position, that's when we got our golden cross. So I like to follow this approach. I like to follow the numbers. That's why the return is the way it is. It's not just random gambling. It's using statistics.

[00:08:24]It's using approaches that historically worked well. And while it's very hard to match exactly the performance that we get with the backtest, at least as per tendency, it tends to be the right call.

[00:08:37]And so if you just want to copy trade whatever I do, then feel free to check out premium. You can get those signals either via Telegram or via email. So link to premium pops up here on the screen. If it's the very first time, feel free to subscribe. A like would be very much appreciated as well. Helps the channel grow. See you next time. Cheers.