The 12th most valuable cryptocurrency in the world, Avalanche (AVAX 3.28%), is a top digital asset many investors watch closely. The Layer-1 blockchain powers much of the decentralized finance (DeFi) world, with its own unique smart contract-based DeFi ecosystem that continues to see strong growth, gaining market share on other leading networks in this space.
Avalanche's technological advancements have allowed this network to process up to 6,500 transactions per second, while retaining some of the best security and scalability functionality in the digital asset space. That's enticing to investors in its own right, many of whom are clearly in buying mode today. Avalanche's native AVAX token is up 7.8% over the past 24 hours, as of 2:30 p.m. ET.
Today's move brings Avalanche's weekly return into the green, with some significant selling pressure for the token seen in yesterday's session. This selling pressure appears to have been a result of a major token unlock, in which 9.54 million AVAX tokens were released to the market on Aug. 19.
Headwind now in the rearview mirror
As is the case with share issuances in the stock market, the addition of new tokens for a specific crypto project tends to lead to outsize near-term volatility. Investors simply don't know if the issued tokens will be sold on the open market immediately. Bracing for impact, many tend to sell ahead of the issuance, choosing instead to wait until the dust has settled to get back in.
In the case of Avalanche, where 9.54 million tokens were unlocked in the market (leading to a circling supply of around 395.4 million tokens), the ultimate overall inflation rate from this unlock amounts to around 2.4%. And the fact that Avalanche has bounced back in the manner it has today (particularly on a day when the overall market is relatively flat) is encouraging.
It appears many now feel free to put positions back on they may have taken off following this announcement, which ultimately resulted in a whimper in terms of overall selling pressure.
Is Avalanche a buy?
One of the key announcements from the Avalanche team tied to this token unlock is that: "Following this event, there will be no additional tokens allocated to the team and strategic partners. Any remaining vesting emissions will be directed toward the Avalanche Foundation, supporting initiatives focused on growth and development." That's good for investors who may be concerned about dilution, with future token sales less likely to be sold in the open market.
Many in the market appear to have assumed that insiders who were granted these tokens long ago would likely divest almost immediately, and while some certainly did, the relative lack of selling in the market may indicate that insiders intend to hold over the long term. If that's the case, this could be a very bullish sign for this crypto project, given how far it's fallen in the crypto market cap rankings from its peak.
Personally, I think Avalanche is among the more intriguing projects out there, and this is one I will be paying closer attention to in the coming days following this recent move.
