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Bearish headwinds have gripped the Avalanche community ahead of the upcoming $97.4 million token unlock slated for August 26. Historical on-chain data analysis explores previous unlock events to predict how Avalanche (AVAX) price could react in the coming days.
On Saturday, August 26, Avalanche will execute a scheduled token unlock of 9.54 million AVAX tokens. The newly-released tokens will be allocated thus:
- Strategic partners – 2.25M tokens (~$23 million)
- The Avalanche Foundation – 1.67M tokens (~$17 million)
- Avalanche team – 4.5M AVAX (~$46 million)
- Community airdrops – 1.1M AVAX (~$11 million)
The newly-unlocked tokens could be worth $97 million at current prices, making up over 80% of AVAX’s average daily trading volume. Hence, strategic investors are anticipating dramatic price movements in the coming days.
How Will Avalanche Token Unlock Impact AVAX Price?
According to the blockchain analytics platform, TokenUnlocksApp, Avalanche last executed a similar-sized token unlock event on May 28, 2023. And within two weeks, Avalanche’s price tumbled 27%, from $15 on May 27 to $11 on June 12.
It’s worth noting that the price drop that week was exacerbated by market-wide FUD surrounding the SEC’s lawsuit against Binance and Coinbase. However, on-chain data suggest the August 26 Avalanche token unlock could trigger a similar Avalanche price downtrend.
Long-term Holders Hold The Cards
Roughly 89% of the $97.4 million tokens set to be unlocked are allocated to Avalanche insiders and strategic long-term partners. Logically, AVAX’s long-term holders’ trading patterns will likely have the most significant impact on price in the coming days.
Drawing inferences from the previous token unlock on May 28, on-chain data shows that AVAX long-term holders will likely conduct a controlled withdrawal rather than an instant sell-off.
Indicatively, since May 28, Avalanche Long-term Holders have gradually depleted their holdings by only 100,000 AVAX, according to data from IntoTheBlock.
Long-term Holder refers to investors who have held tokens in their wallet addresses, unmoved for at least one year. When Long-term holders retain a significant number of tokens, it signals their sustained confidence in the project’s technical viability.
This often convinces newer network participants to take a positive disposition toward the native token’s price prospects.
The chart above shows that tokens held by long-term holders dropped by 11% since the last Avalanche token unlock. Unsurprisingly, AVAX’s price is now down 32% during that period.
If they repeat the same controlled sell-off, AVAX price could react with another double-digit percentage price downswing after August 26.
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Strategic Crypto Traders are Waiting to Buy the Dip
A token unlock event typically triggers varying reactions from different groups of investors. Interestingly, on-chain data shows that some strategic crypto traders have reacted by mounting orders to buy the dip.
The Exchange On-chain Market Depth chart below depicts the price distribution of current AVAX orders placed across recognized crypto exchanges.
Currently, crypto traders have placed active orders to purchase 950,700 AVAX. Meanwhile, sellers have only put up 618,840 AVAX for sale.
When the Ask/Buy side of the market depth chart surpasses the Bid/Sell side, it often indicates impending bullish action. The volume of market demand for Avalanche has exceeded supply by nearly 331,860 AVAX. This can be attributed to the strategic crypto traders looking to buy the dip around the upcoming token unlock event.
In summary, the rising market demand bullish traders looking to buy the dip could absorb the initial sell pressure after the token unlock. However, if the long-term investors execute another prolonged gradual sell-off, AVAX price could eventually drop.
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AVAX Price Prediction: Initial Increase Before Bearish Reversal
Based on the on-chain analysis, the upcoming Avalanche token unlock will likely trigger an initial price increase before AVAX price retraces. The In/Out of Money Around Price data, which shows current holders’ entry price distribution, also validates this prediction.
As shown below, 13,740 holders had bought 1.32 million tokens at the minimum price of $10.02. If these holders buy more tokens to cover their positions, they could trigger a rebound.
But if that support level fails to hold, AVAX could retrace below $8 after the Avalanche unlock.
Still, the bulls could overturn the bearish momentum if they can trigger a rebound above $15. However, as shown above, the 44,760 holders bought 1.17 million at the maximum price of $11.
If the long-term holders begin a sell-off as predicted, they could cause a pullback. But if that resistance level cannot hold, AVAX could reclaim $15.