As of the time of writing on Wednesday, Avalanche (AVAX) is trading in the green with an increase of nearly 1%, while this coin continues to test the important support area that has been maintained steadily for more than two months. However, the short-term outlook for AVAX is not very optimistic: open interest (OI) in the derivatives market has dropped to the lowest level in the past 30 days, and technical indicators are currently signaling a deeper correction — potentially dropping to the lowest price range since the beginning of the year.
Negative sentiment is rising in the AVAX derivatives market.
According to data from Coinglass, the open interest (OI) of AVAX has decreased to $441 million, marking a drop of over 3% in the past 24 hours – the lowest level in the last 30 days. This trend reflects that funds are continuing to withdraw from AVAX's derivatives market amid noticeably weakened buying power.
The bleak market sentiment has led to the liquidation of long positions worth $1.40 million within just 24 hours, while short positions were liquidated only to the tune of $86,000. This indicates that most investors betting on a bullish trend have had to cut losses, yielding dominance to the bears. Simultaneously, the Long/Short ratio has dropped to 0.9451 – indicating that selling pressure is overshadowing buying power.
The funding rate also reflects a tug-of-war in sentiment, fluctuating around neutral levels. Nevertheless, the latest figure recorded is 0.0022%, revealing the first positive signals from short-term buying power.
However, the prevailing trend still leans towards the bears, as evidenced by negative indicators from the derivatives market. This suggests that AVAX may continue to face adjustment risks if there is not enough buying power to reverse the situation.
AVAX is at risk of dropping to the $16 area.
At the moment, AVAX is still holding strong at the important support level of $18.50 – coinciding with the bottom established on April 16 – after slightly bouncing from the low of $18.13 recorded on Tuesday. However, the price action in recent sessions continues to reflect strong selling pressure, clearly shown through the long-wicked candles – a sign that the bulls are losing ground against the sell-off.
If AVAX cannot hold the $18.50 area and closes below this level, the likelihood of a continued downtrend is high, bringing the price down to the next support zone at $16.14, and it could even retest the year’s low at $14.66.
Technical indicators on the daily frame are reinforcing the negative scenario. The MACD line remains below the signal line and has not shown signs of crossing upwards, indicating that the downtrend shows no signs of weakening. At the same time, the red histograms are increasingly widening below the zero line – indicating that selling pressure is intensifying.
The relative strength index (RSI) is currently at 38 – just above the oversold area, but still deep below the average threshold of 50, indicating that bearish pressure is still present. This further reinforces the likelihood that AVAX will continue its downward trend in the short term.
Typically, when the RSI touches the oversold threshold, the market tends to reverse upwards. However, if AVAX continues to hover around this area, the correction could last longer than expected.
In a positive scenario, if the overall market gradually stabilizes and AVAX rebounds from the important support level at $18.50, this altcoin could open up recovery opportunities, aiming for the 50-day exponential moving average (EMA) around $21.11.
