AVAX is the native cryptocurrency of the Avalanche blockchain.
Avalanche is a project similar in some ways to Terra/Luna and was born as a kind of competitor to Ethereum.
The blockchain was born in 2020, although the development of its basic principles began in 2018.
The distinguishing feature of the Avalanche network are the so-called subnets, which are independent subnetworks with their own autonomous logic, but leaning on the original security of the parent network.
AVAX, Avalanche’s native blockchain cryptocurrency
Avalanche’s native cryptocurrency, AVAX, only made its debut in the crypto markets in September 2020, and a price that was initially around $5.
Until early January 2021, its price lateralized between $3 and $4, but when the latest big bull run began for altcoins, its price soared.
2021 was a very striking year for AVAX, so much so that already by the end of January its market value had risen to $12.
It had its first resounding peak in February, when it touched $55, then dropped to $10 in July.
It had its second peak in November, when it went as high as $146. At that point, the gain since its debut only 14 months earlier was 2,800%.
While it was nowhere near one of the highest-gaining cryptocurrencies in 2021, the one formed on its price nevertheless remains a major speculative bubble.
In fact, as early as January 2022, which is two months after the peak at $146, its price had already fallen below $60.
The main collapse, however, occurred between April and June, with a drop all the way below $17.
The thing is, since Avalanche is perceived as a project similar to Terra/Luna, the implosion of the latter triggered panic among AVAX holders. Not least because Avalanche is too recent a project to already be considered solid.
While in August it was already almost back to $30, by November it was back below $20, and with the collapse of FTX it plunged below $12. The last figure is in line with that of January 2021, so at that point it might have seemed that the price of AVAX had lost everything it had gained during the most recent big speculative bubble.
Instead, it suffered another collapse on 16 December, bringing it below $11.
The current value is still well above both the placement value and the December 2021 value, but the trend still seems to be downward.
The Avalanche protocol
The Avalanche protocol is specifically dedicated to decentralized finance, with decentralized exchanges, lending platforms, smart contracts, token creation, and NFTs.
It has long been among the top ten blockchains for TVL DeFi, whereas by market capitalization AVAX has fallen to 19th place after being close to the top ten.
Very interesting is the parabola of Avalanche’s TVL, particularly in 2021.
In fact, until August, it had never risen above $1 billion, only to suddenly surge and reach first $2 billion at the end of August, and then $12 billion in December.
In 2022, however, its TVL literally plummeted. As early as January it had fallen to 7 billion, and then plummeted from April to June to just over 2 billion.
From August 2022 it began to fall again, even returning below 800 million in December.
By far the DeFi protocol with the most TVL on Avalanche is Aave, which is a lending protocol that originated on Ethereum. The second, Benqi, is specific to Avalanche, but has less than half the TVL of Aave. The third protocol on Avalanche for TVL, Stargate, is also not native to this platform.
In particular, the collapse of Benqi, which has had its TVL reduced more than tenfold in less than a year, from $1.8 billion down to $140 million, seems very significant.
From this data, it seems clear that there are specific problems related to the Avalanche ecosystem, not so much from a technical point of view, but mainly from the point of view of utilization and perhaps even from the point of view of trust.
Indeed, it is not strange that at critical times like this many DeFi users prefer to opt for more solid and secure solutions, primarily those on Ethereum or born and tested long ago on Ethereum.
Therefore, it is hard to imagine that Avalance can boom in the short term and return to the glories of 2021. There is a lot of competition, and in times like these more solid competitors with more history behind them are inevitably favored.
The future of Avalanche and its crypto AVAX
Expectations on Avalanche have always been very high in the past years, although with the current bear market they have been scaled back quite a bit.
In particular, these concern the potential for integrating crypto and blockchain tools with the world of finance and big business.
In fact, Avalanche is a complex network designed for even complex, though primarily financial, uses.
The most interesting aspect seems to be precisely that related to the possibility of creating private or permissioned blockchains through the use of subnets, with their own rules and autonomous and independent functioning mechanisms.
It is precisely because of this functionality that Avalanche would like to become a real hub for interfacing the real economy with the blockchain world.
This of course should be done through tokenization, which is the creation of digital assets referring to objects or assets in the physical world. For example, it is possible to create Fixed-Cap Assets, which are tokens that are fungible but have a maximum number beyond which none can be issued.
The goal is to allow anyone, and especially companies, to easily create their own blockchain, with their own tokens and NFTs, their own smart contract rules, and their own decentralized applications. In other words, offer everyone the opportunity to create their own blockchain network without having to build it from scratch, but by backing it up to Avalanche’s existing blockchain infrastructure.
The AVAX cryptocurrency could play a crucial role in this project, partly because it is only by staking it that one can participate in the governance of Avalanche.
Therefore, on the one hand, the prospects remain attractive, while on the other hand, the bear market is testing its survival among the leading of crypto projects.