Avalanche (AVAX) loses over 30% in April, but its DeFi footprint leaves room for upside

Avalanche (AVAX) price is down more than 30% in April, but despite the negative price action, the smart contract platform remains a top contender for decentralized applications (DeFi) landscape due to its scalability, low-cost transactions, and large footprint in the decentralized finance .

AVAX Token/USD on FTX. Source: TradingView

Compatible with the Ethereum Virtual Machine (EVM), the network is unique in that it does not face the same operational bottlenecks such as high transaction fees and network congestion.

Avalanche has accumulated over $9 billion in Total Value Locked (TVL) by offering a Proof-of-Stake (PoS) Layer 1 scaling solution. This indicator is extremely relevant as it measures deposits into the network’s smart contracts. For example, the BNB chain, which has been running since September 2020, holds $10.4 billion in TVL.

Positive news could create price support

Even though the AVAX token price has suffered and even the TVL is behind some of its peers, investors remain bullish based on the fundamentally positive developments in the month of April.

According to a Bloomberg report April 14, Ava Labs, the lead developer of the Avalanche blockchain, has raised $350 million from investors. That deal valued the company at $5.25 billion, and according to data from DappRadar, Avalanche has nearly 100 active applications ranging from decentralized finance to non-fungible token (NFT) marketplaces and gaming.

In early April, the organizations behind algorithmic stablecoin Terra USD collectively bought AVAX for their Terra USD strategic reserves for $200 million. Do Kwon, co-founder of Terra, cited Avalanche’s solid ecosystem growth and large user base.

Despite the positive news, AVAX’s price remains 53% below its all-time high of $147, resulting in a market cap of $18.4 billion. In comparison, Terra (LUNA) has a market cap of $31.0 billion and Solana (SOL) has a combined value of $33.3 billion.

The total locked value falls by 10.5% but follows the market-wide downtrend

Avalanche’s primary DApp metric has strengthened over the past 30 days as the network’s TVL increased to 121 million AVAX.

Avalanche total locked, AVAX. Source: Defillama

The chart above shows how Avalanche’s DApp deposits peaked at 132.9 million AVAX on March 14, but fell drastically in early April to their lowest level since January 3. As a result, the current TVL of $8.5 billion is down 10.5% over the past 30 days.

For comparison, Solana’s (SOL) TVL declined 9.5% over the same period to hit $4.8 billion. Similarly, Ethereum’s smart contract deposits fell from $88.3 billion to $80.1 billion over the same period, a 9% decline.

To confirm whether the TVL drop in Avalanche is problematic, one should analyze the DApp usage metrics. Some DApps like games and collectibles don’t require large deposits, so the TVL metric is irrelevant in these cases.

Avalanche DApps 30-day data. Source: DappRadar

As shown by DappRadar, the number of Avalanche network addresses interacting with decentralized applications decreased by 14% on April 28 compared to the previous month. In comparison, the Solana network saw a 60% increase in users, while Ethereum remained flat.

Avalanche’s strong DeFi use case is still a positive

Even though Avalanche’s TVL has been hit the hardest compared to similar smart contract platforms, there is solid network usage in the DeFi segment. For example, Trader Joe’s 180,830 active addresses are higher than Ethereum’s leading DeFi application, MetaMask Swap, which has 116,210 active users.

The above data suggests that Avalanche is holding its own against competing chains. With AVAX price down 29.5% in 28 days, investors shouldn’t panic as the decentralized application network posted solid TVL and DApp usage data.

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