Why Avalanche (AVAX) Expands DeFi Influence
Avalanche (AVAX) broke out in the past day, adding 16% to its price to become one of the biggest daily movers. AVAX traded above $59, attempting to reclaim its all-time highs near $62.
AVAX trading volumes are also within the higher end of its historical range, standing above $1.4B in the past 24 hours. The project remains one of the most hopeful tokens for continued expansion, mostly due to the growth of the decentralized finance ecosystem.
How Influential is Avalanche
Project trackers for the most active DeFi hubs on Avalanche suggest the platform now locks in more than $3.34B in value. This puts Avalanche among promising contenders, while still lagging behind the biggest platforms.
Currently, Ethereum locks in more than $91B in value and is still the bellwether for decentralized finance. But within that ecosystem, various startups carve their own niches. Projects like Polkadot and Polygon (MATIC) continue to draw in liquidity by promising higher speeds and lower fees.
Avalanche is comparable to Solana (SOL) in having built a blockchain independent from Ethereum. Solana has so far managed to draw in around $9B in total value locked.
Is AAVE a Gamechanger for Avalanche
The most important factor for DeFi is to build up an active community and ensure significant liquidity.
The Aave (AAVE) project is one of the most influential liquidity sources on Ethereum. As of September 2021, Aave locks in more than 16% of all assets in Ethereum-based DeFi. Now, a proposition has been made to launch a version of Aave on the Avalanche network, possibly bringing bridge access and a thriving community to a new network.
The Avalanche community will have to vote the proposal in. The decision is the latest event of DeFi decentralization, where some projects gain access to multiple networks. So far, the most common bridges involve Ethereum and Binance Smart Chain, as well as Ethereum and Solana.
In the past days, Avalanche also showed significant inflows through the Ethereum bridge. Avalanche is one of the leaders in deposits, showing a shift in demand.
Decentralized Finance Expands Stablecoin Liquidity
While centralized exchanges depend on the Tether (USDT) asset and a handful of other stablecoins, decentralized finance has continued to mint its own dollar-pegged tokens.
Recent research shows significant growth in the minting and circulation of algorithmic stablecoins. The creation of those assets and their stability hinges on the activity within DeFi space.
DAI remains the most numerous asset, though other projects like Terra (LUNA) are also quickly gaining ground.
Avalanche may become one of the platforms that will grow the influence of Terra USD (UST), as algorithmic stablecoins launch as tokens on multiple networks.
Is AVAX Trading Risky
AVAX is a growing ecosystem, but in the short term, the native asset continues to see speculative trading. One of the reasons is that most AVAX activity is concentrated on Binance trading pairs. More than 45% of all AVAX activity depends on this one exchange, with smaller markets for other Asian or international market operators.
AVAX is currently unavailable for US-based persons, though it can be reached through its decentralized trading pairs.
AVAX also has a relatively scarce supply, with around 220M in circulation. A significant amount of AVAX have been staked in various forms, through validators. AVAX can also be staked offline, for a form of passive income.
Avalanche Built Complete DeFi Ecosystem
The Avalanche ecosystem is available through a web-based Avalanche wallet. The tool can hold all assets and access decentralized projects.
Pangolin is one of the most active automated market makers (AMM) on Avalanche, with more than 74 pairs listed. The Pangolin exchange has also received a $2M subsidy from Avalanche to boost liquidity and development. Reportedly, Pangolin holds more than $300M in liquidity.
Yield Yak is the project to optimize passive returns from locking in funds. As with other DeFi projects, Avalanche-based tokens hold the significant risk of rapid losses and potentially low liquidity.
TraderJoe is currently listed as the most widely used trading distributed app, with more than 6,800 users registered in the past 24 hours. According to DappRadar, the Avalanche network carries 61 distributed apps. Those include yield farms, an NFT marketplace, and several independent NFT collections.
How High can AVAX Go
The DeFi space grows by leaps, with signs of growing liquidity. Older predictions for AVAX envisioned prices of around $10. The asset easily broke $60, and there are expectations of moving up as high as $500.
AVAX now competes with projects like Fantom (FTM) for short-term interest in trading. Currently, Avalanche remains one of the most active smart contract platforms, outcompeting Cardano (ADA) in carrying meaningful projects.
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