AVAX aims for a 27% increase, but is the momentum from DeFi sufficient?

Avalanche (AVAX) has just experienced a relatively calm month with the price hovering around 24.42 USD, almost without any significant fluctuations. Nevertheless, in the past 24 hours, this coin has surged by more than 2%.

In the three-month frame, AVAX has provided a return of about 12%. However, since the beginning of the year, the increase has only reached 5.7% – quite modest when compared to many competitors in the cryptocurrency market.

The positive point is that the outlook is gradually improving. DeFi activities on Avalanche are showing signs of acceleration, promising to bring demand to the spot market. If this trend continues, AVAX could completely break out to the 31.07 USD range, corresponding to an increase of about 27% from the current level.

The motivation from DeFi could push the price of AVAX higher.

DeFi activities on Avalanche are showing a clear explosion, despite the fact that the price of AVAX has been almost "pinned" around the 24 USD mark for several weeks.

In just 7 days, the supply of stablecoins on the network has increased by 14%, with USDC alone surging by 31% in one month. The abundant liquidity has led to more activity on decentralized exchanges, with trading volume on Avalanche's DEX more than doubling in just three months.

Notably, in the last 24 hours, the amount of stablecoin flowing into Avalanche even surpassed that of Solana – which is often seen as the chain leading in this metric. At the same time, the number of daily transactions also surged, increasing nearly 5 times compared to last month, indicating that traders are not turning away. They are opting to hold stablecoins, taking advantage of opportunities in the DeFi ecosystem and preparing for their next strategic moves.

"The Stablecoin supply increased by 14% ( in a week ). The USDC supply increased by 31% ( in a month ). The trading volume on DEX increased by 2.5 times ( in 3 months ). The Stablecoin inflow into ( in 24 hours ) > Solana. Daily trading increased by 5 times ( in a month )"

In previous cycles, the DeFi boom often served as an early signal of increasing demand for the native token. With Avalanche, this is even more important as users have to pay fees in AVAX, while also needing to hold AVAX to participate in pools and yield farming. As activity picks up again, the demand for AVAX also tends to rise – a factor that is causing more and more traders to start talking about the potential for a price breakout.

AVAX price chart for signals heading to 31.07 USD

On the daily chart, AVAX is forming an ascending triangle pattern, with consecutive higher lows and compressing into a horizontal resistance area.

Each adjustment is quickly absorbed at a higher price level, reflecting a steadfast and persistent demand. Traders often combine triangle patterns with Fibonacci levels, and if measured from the nearest oscillation, the first target could aim for the 31.07 USD range – which is approximately 27% higher than the current 24.42 USD level.

AVAX/USDT daily chart | Source: TradingViewA breakout to this area would not be surprising if the bulls continue to maintain control. However, to strengthen the bullish scenario, AVAX needs to overcome several key obstacles:

First, the price must close above the resistance line of the triangle - the area that this coin has touched multiple times in recent weeks. Only a solid close above will confirm that the bulls have truly pushed aside the selling pressure.

Conversely, if the price drops below the nearest low, the bullish signal will weaken. In particular, a close significantly below the triangle bottom or the 22.15 USD mark could cause the entire scenario to be "reset," while also significantly delaying the breakout prospects.

Why might the increase take more time?

A notable point is that the derivatives market is entering a state of stagnation. Open interest has decreased from 962.8 million USD on August 24 to 823.7 million USD on August 27, reflecting a gradual reduction in leverage in the market.

When the leverage level decreases, the potential for breakouts still exists, but the pace is usually slower and rarely creates strong "squeeze" candles. This makes the spot market the main driving force for price volatility.

Open contract of AVAX | Source: CoinGlassIn the context of a vibrant DeFi, the demand for spot trading shows signs of improvement, but more time is still needed to break through the resistance zone that has been tested multiple times.

The bull-bear power index of AVAX | Source: TradingViewAnother supportive factor is that the "bull-bear power" indicator has just shifted to a positive state, indicating that the bulls have been dominant in several recent sessions. This signal reinforces the ascending triangle pattern, but only plays a supportive role rather than an independent triggering factor. Therefore, if open contracts continue to decline, even if the balance tilts toward the bulls, the price of AVAX will still struggle to make an immediate breakout.

Summary

DeFi activity on Avalanche is showing signs of a boom, laying a solid foundation for the price increase of AVAX. On the technical chart, a rising triangle pattern has formed with a Fibonacci target at the 31.07 USD level.

Notably, open contracts in the derivatives market are cooling down, indicating that the main momentum is currently coming from spot trading. If AVAX can close above the resistance zone, the door to 31.07 USD will be wide open. In the event that leverage returns, the uptrend could be strong and faster; conversely, if there is a lack of push from derivatives, the upward trend will still be maintained but will progress more slowly and with more volatility.

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