Avalanche’s native token, AVAX, is facing significant headwinds, with a potential drop to as low as $14 on the horizon. The cryptocurrency has recently experienced heightened selling pressure, compounded by a massive outflow of liquidity and the breach of a key support level. These developments suggest that AVAX could continue its downward trajectory, as bearish sentiment takes hold across the market.

AVAX’s Struggles Intensify

In the past week, AVAX has experienced a notable decline of 7.16%, with a further drop of 4.60% in the past 24 hours. This decline comes after the token breached a crucial support level, which is typically seen as a critical area where the price could either stabilize or reverse. Unfortunately, AVAX failed to maintain this support, signaling a potential formation of lower lows.

The increased selling pressure has been exacerbated by a major sell-off in the last 24 hours, fueling fears that AVAX could face even steeper losses in the coming days. Analysis suggests that the recent price action is not merely a short-term retracement, but rather a signal of an impending continuation of the downtrend.

$3.9 Million Liquidity Outflow

One of the key factors contributing to AVAX’s current struggles is the significant outflow of liquidity from its network. In the past 24 hours alone, a staggering $3.9 million worth of AVAX has been withdrawn from the Avalanche chain, according to data from Artemis. This level of outflow is concerning, as it reflects a broader shift in investor sentiment, with many moving their funds into more stable assets, such as stablecoins, in anticipation of further losses.

The substantial liquidity withdrawal further compounds the bearish outlook for AVAX, as it suggests that investors are losing confidence in the asset and its future prospects. This trend is also indicative of a broader market retreat, where risk-averse investors are pulling back from altcoins like AVAX and seeking safer havens.

Head and Shoulders Pattern and Bearish Outlook

The breach of the $22.87 support level has triggered the formation of a classic technical pattern known as the “head and shoulders.” This pattern is widely regarded as a strong bearish signal, often preceding a significant price drop. The neckline support at $22.87 was expected to act as a key area for potential rallying, but with its failure, the bearish scenario has gained more traction.

Typically, when a head and shoulders pattern forms, it is followed by a substantial decline once the support level is breached. In this case, analysis suggests that AVAX could fall to its next significant support level at $14.40, representing a potential 27.46% drop from its current price. This level is crucial for AVAX, as it could either mark a temporary bottom or signal a deeper downturn.

Technical Indicators Point to Further Declines

In addition to the formation of the head and shoulders pattern, technical indicators are also supporting the bearish outlook for AVAX. The Relative Strength Index (RSI), which measures the momentum of a cryptocurrency, has been showing a gradual increase in highs along an ascending line. While this might initially appear as a bullish sign, in this case, it suggests an impending breakdown. The RSI’s movement often signals a shift in momentum, and when it reaches certain levels, it can indicate that a decline is imminent.

Moreover, the Bull Bear Power (BBP) indicator, which helps measure the relative strength of buyers versus sellers, is also signaling bearish dominance. The formation of a bearish histogram on the BBP indicates that sellers are in control, with the strength of the bear market outweighing the bulls. This suggests that, as long as the bearish momentum continues, AVAX’s price will likely continue to fall.

Is a Recovery Possible for AVAX?

While the current outlook for AVAX is decidedly bearish, some traders and analysts are still holding out hope for a potential recovery. The cryptocurrency market is notoriously volatile, and while technical indicators point to further declines, it’s always possible that external factors or market-wide changes could reverse the trend.

However, for AVAX to regain its bullish momentum, it would need to overcome several hurdles. The first step would be reclaiming the $22.87 support level and breaking through key resistance levels. Furthermore, the massive liquidity outflows would need to reverse, and investors would have to regain confidence in the project’s long-term prospects.

Conclusion

AVAX is currently facing a turbulent period, with significant selling pressure, liquidity outflows, and bearish technical patterns suggesting further price declines. With $3.9 million exiting the network and a failure to maintain critical support levels, the cryptocurrency is at risk of dropping to as low as $14. While a recovery remains possible, the current market sentiment and technical indicators strongly favor continued bearish momentum. Investors will need to keep a close eye on the asset’s price action and broader market conditions to assess whether AVAX can recover or if the downward spiral will continue.