Avalanche (AVAX) is having to pay the cost to be among the collateral assets that maintain Terra’s native stablecoin TerraUSD’s (UST) peg using the U.S. dollar.
Major AVAX dump ahead?
AVAX’s cost dropped about 30% to achieve $32.50 on May 11, its cheapest level since September 2021. Its massive intraday decline coincided with UST shedding to as little as 23 cents, which effectively dented its stablecoin status among traders and investors alike.
The de-peg incident happened despite Luna Foundation Guard, a Singapore-based nonprofit supported by TerraLabs, emptying its crypto reserves to support the UST peg. The firm presently holds 1.97 million AVAX worth nearly $74.75 million, based on data shared by analyst CrypOrca.
An identical sentiment could be observed within the LUNA market, another crypto LFG holds as collateral to back UST. LUNA’s value came by 85% on May 11, its worst daily performance.
Bearish AVAX cost technicals
Avalanche bulls tried to save AVAX from falling below a vital support line near $36, coinciding using the .238 Fib type of the Fibonacci retracement graph extended in the $.29-swing low towards the $34.52-swing high.
Their efforts helped the token recoup almost 22% of their May 11 losses, using its cost rebounding from $32.50 to in excess of $39.50.
However a full-fledged bullish reversal seems unlikely as AVAX’s upside retracement faces one strong resistance to another.
Initially, the token now eyes a run-up toward an assistance-switched-resistance area, marked because the accumulation focus the chart below. The upside target coincides using the .618 Fib line around $67.
A decisive close over the zone might have AVAX test its 50-day exponential moving average (50-day EMA the red wave) near $69 and it is 200-day EMA (nowhere wave) around $74 as next resistances.
But AVAX also faces headwinds from the greater rate of interest atmosphere which has dampened buying sentiment over the crypto market.
This might prompt the AVAX/USD pair to retest $36 as support for any breakdown move, which risks leading the cost toward $20, an essential cost floor from February-April 2021.
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