Avalanche (AVAX) jumped 43.8% between March 14 and March 31 to a daily close of $97.50, which is the highest level since January 5. This layer 1 scaling solution uses a proof-of-stake model and has amassed $9 billion in total. locked value (TVL) deposited in the smart contracts of the network.
AVAX/USD token on FTX. Source: TradingView
Subnetting adoption drives recent price rally
Some analysts attribute the uptick to Avalanche’s incentive program to accelerate subnetting adoption that was announced on March 9. According to the Avalanche Foundation, subnets enable features that are only possible with “network-level control and open experimentation.”
The program will allocate up to four million AVAX, worth approximately $340 million, to fund decentralized applications focused on gaming, non-fungible tokens (NFTs), and financial applications (DeFi).
Wes Cowan, Managing Director of DeFi at Valkyrie Investments, added that “the Avalanche subnet with KYC infrastructure will be a huge step forward for institutional adoption.”
Even with the good news, AVAX price is still 33% below its all-time high of $147 and the token has a market cap of $26.3 billion. For comparison, the market capitalization of Terra (LUNA) is $38.1 billion and Solana (SOL) has a total value of $43.8 billion.
Avalanche is also compatible with the Ethereum Virtual Machine (EVM) and is not affected by the $15 average transaction fees and network congestion that affect the Ethereum network.
Related: Traders Predict $3,800 Ethereum, But Multiple Data Points Suggest Otherwise
The use of Avalanche smart contracts is on the decline
Avalanche’s main DApp metric began to show weakness in March after the network’s TVL fell below 94 million AVAX.
Total avalanche value locked, AVAX. Source: DefiLlama
The chart above shows how Avalanche DApp deposits peaked at 132.9 million AVAX on March 14, but dropped sharply to the lowest level since January 3. December 2021.
Meanwhile, Terra’s TVL increased 116% between January and March 2022, reaching $19.8 billion. Similarly, Waves smart contract deposits increased from $730 million to $4.5 billion in the same period.
To confirm if the TVL drop in Avalanche is problematic, DApp usage metrics should be analyzed. Some DApps, such as games and collectibles, do not require large deposits, so the TVL metric is irrelevant in those cases.
Avalanche DApps 30-day data. Source: DappRadar
As shown by DappRadar, on April 1, the number of Avalanche network addresses interacting with decentralized applications decreased by 16% compared to the previous month. By comparison, the Solana network saw a 6% increase in users, while Ethereum was down 11%.
Although Avalanche’s TVL has been hit the hardest compared to similar smart contract platforms, there is strong use of the network in the decentralized finance (DeFi) segment.
The above data suggests Avalanche is losing ground to competing chains. Given that AVAX is up 43.8% in 17 days, some incumbents may feel uneasy if the decentralized app network continues to post weak TVL and DApp usage data.
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This post AVAX Traders Anticipate New ATH Even As Avalanche DApp Usage Slows
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