What is AVAX/USD?
AVAX/USD is the trading pair of the AVAX token and the US dollar, or the number of dollars required to purchase one AVAX.
AVAX is the native token of Avalanche, an open-source blockchain project for the development of decentralised financial applications.
Avalanche's architecture enables it to process up to 4,500 transactions per second while maintaining scalability, a challenge it seeks to address alongside security and decentralisation, also known as the blockchain trilemma.
Avalanche's design differentiates itself from other blockchain projects in three ways:
- Avalanche employs a novel consensus mechanism that draws on the foundation of Proof of Stake (PoS), which verifies the legitimacy of transactions by requiring users to demonstrate their "stake" in the network.
- Avalanche introduces subnetworks, enabling users to launch specialised chains with their own rules. Developers of Avalanche can create apps and blockchain networks with complex rule sets, or they can build on existing private or public subnets.
- Avalanche uses three distinct blockchains to effectively address the blockchain trilemma: the 'Exchange Chain' is used to create and transfer assets (such as AVAX); the 'Contract Chain' is used to execute smart contracts; and the 'Platform Chain' coordinates validators.
AVAX plays a pivotal role in powering transactions within the Avalanche ecosystem, distributing system rewards, facilitating governance participation, and covering network transaction fees. The value proposition of AVAX lies in its capped supply of 720 million tokens, of which half were distributed during Avalanche’s launch in September 2020. This limit is in place to assure scarcity, which can help preserve the value of the token over time.
Incentives for staking AVAX result in a relatively low circulating supply, even during periods of significant demand. Additionally, Avalanche distinguishes itself by burning all transaction fees paid in AVAX, thereby restricting the supply of the tokens to ensure the longevity of the network.
AVAX/USD historical performance
From its all-time low of $2.79 on December 31, 2020, AVAX reached its all-time high (ATH) of $146 in November 2021. In 2023, it traded between USD20 and under USD10, less than a tenth of its all-time high.
What affects the price of AVAX/USD?
Market sentiment, which is influenced by the news and social media, can affect the price of AVAX and other cryptocurrencies. Positive news regarding AVAX's technology, partnerships, adoption, or increased use in real-world applications has the potential to enhance sentiment and increase price.
Announcements of upgrades or advancements to the Avalanche blockchain technology can have an impact on AVAX. Investors may view favourably positive developments that enhance security, scalability, or functionality.
The overall trends and liquidity of the market can affect AVAX's price. AVAX may rise if there is a general bull market in cryptocurrencies, along with other digital assets.
What to watch out for when trading AVAX/USD?
When trading AVAX/USD, traders must actively follow data releases and remarks from organisations that might affect regulatory regulations, market sentiment, and the cryptocurrency market as a whole. These are as follows:
- Avalanche Foundation updates, including news about grants, development milestones, and ecosystem growth, including interoperability with other blockchains
- Statements or actions from regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States or the Markets in Crypto Assets (MiCA) regulation in Europe
- The listing of AVAX on prominent exchanges may increase its liquidity and trading volume, which may influence its price
- Sentiment regarding AVAX on social media platforms, message boards, and news outlets