AVAX Price Drops to Early 2021 Support Levels: Are We Approaching a Bottom?
AVAX’s price has dropped to levels reminiscent of early 2021, following a widespread liquidation in the market that eliminated critical support around $8, leading to a generally pessimistic sentiment among traders.
Summary
- AVAX’s value has hit its lowest point since January 2021, due to a significant liquidation event across the crypto sector that wiped out important support levels.
- Open interest has decreased to $159 million, with more than 70% of derivative positions remaining short, reflecting a bearish sentiment in the market.
- Market participants are closely monitoring the “Ultimate Support” level at $6.25; if this is breached, AVAX could face further declines towards $5.46 and $4.68.
As reported by crypto.news, Avalanche (AVAX) saw a 14% drop, reaching an intraday low of $6.26 on Saturday, June 6, marking its lowest level since January 2021, before stabilizing at $6.64 during this report.
This drastic decline followed Bitcoin (BTC) briefly slipping below the crucial $60,000 support, almost touching $59,000, which prompted traders to reduce risk as leveraged long positions were wiped out. Additionally, the Crypto Fear & Greed Index fell to 12, indicating Extreme Fear, underscoring the poor sentiment in the digital asset market.
Leverage Liquidation Leaves AVAX Near Early 2021 Levels
The recent decline was not attributed to any specific shortcoming within the Avalanche network. Prior to the selloff, Avalanche had robust institutional and on-chain activity, boasting over $1.16 billion in on-chain real-world assets and the launch of regulated AVAX futures by CME Group.
However, these factors provided little protection once the market entered a phase of forced deleveraging. More context reveals that over $1.86 billion worth of long liquidations occurred across crypto derivatives, with high-beta layer-1 tokens like AVAX experiencing more significant losses than Bitcoin.
Derivatives positioning has also declined, with open interest in AVAX falling to approximately $159 million. This suggests fewer traders are willing to hold active positions during this downturn. On the other hand, over 70% of positions remain short, indicating a market inclination towards further declines rather than a quick turnaround.
According to CoinGlass liquidation heatmap data, substantial leverage remains above the current price, especially around $7.00, $7.50, $8.00, $8.50, and the $8.80–$9.20 range. A recovery into these levels could trigger short liquidations, but existing market activity has not demonstrated sufficient demand to ignite that squeeze.
Analyst Dr. Chart MAZEN previously noted in a post that AVAX continues to face the risk of further declines unless buyers can re-establish higher price levels. “I have identified a classic continuation pattern for downside if the $8.20 area breaks,” the analyst stated, closely watching “6.53” and “5.77” as potential lower thresholds.
Technical Setup Indicates a Fragile Bottom Case
Earlier today, AVAX approached its critical Murrey Math support zone around $6.25, marked as ‘Ultimate Support’ on the daily chart. The token had previously lost the $7.81 and $7.03 support levels during the liquidation-driven selloff, making the $6.25 area a vital line that bulls need to defend to avert a deeper decline toward the oversold region near $5.46.
At the time of writing, AVAX is trading below both the 50-day moving average, which stands at $9.15, and the 200-day moving average at $10.66.
For a bullish market structure to be reinstated, reclaiming these levels is critical, although the defense of the $6.25 support zone is beginning to attract interest from traders looking for indications of a possible long-term bottom.
Current resistance is positioned around $7.03, followed by $7.81 and $8.59. A close above $8.20 would lessen the downside continuation scenario pointed out by Dr. Chart MAZEN, while a substantial move above $10 would redirect focus onto the 200-day average and significant trend resistance.
The risk for downside remains clear. A daily close below $6.25 would keep sellers in charge and expose AVAX to the -1/8 Murrey level near $5.46. Beyond that, the next major downside zone is around $4.68, while Dr. Chart MAZEN’s $5.77 level may serve as the initial test prior to more substantial capitulation.
AVAX still holds the potential for establishing a bottom if buyers defend the $6.25–$6.50 zone and compel shorts to unwind above $7.50. Until the price reclaims $8.20 with significant volume, the current chart indicates a weak recovery attempt rather than a confirmed reversal.
Disclosure: This article is not intended as investment advice. The information and materials on this page are for educational purposes only.
