AVAX dealers anticipate a new ATH even as Avalanche DApp usage slows down

Avalanche (AVAX) is up 43.8% between March 14 and March 31 to a daily close of $97.50, its highest level since January 5. This Layer 1 scaling solution uses a Proof-of-Stake model and has amassed a total of $9 billion in Value Locked (TVL) deposited in the network’s smart contracts.

AVAX Token/USD on FTX. Source: TradingView

Subnet adoption is driving the recent price rally

Some analysts attribute the rally to Avalanche’s incentive program to speed up subnet adoption, announced on March 9th. According to the Avalanche Foundation, subnets enable capabilities that are only possible with “network-level control and open experimentation.”

The program will provide up to four million AVAX, valued at approximately $340 million, to fund decentralized applications focused on gaming, non-fungible tokens (NFTs), and financial (DeFi) applications.

Wes Cowan, Managing Director of DeFi at Valkyrie Investments, added that “Avalanche’s subnet with KYC infrastructure will be a big step forward for institutional adoption.”

Despite 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, Terra (LUNA) has a market cap of $38.1 billion and Solana (SOL) has a combined value of $43.8 billion.

Avalanche is also compatible with Ethereum Virtual Machine (EVM) and is not plagued by the $15 average transaction fees and network congestion that affect the Ethereum network.

Related: Traders predict Ethereum at $3,800, but multiple data points suggest otherwise

Avalanche smart contract usage is declining

Avalanche’s primary DApp metric began showing weakness in March after the network’s TVL fell below 94 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 to their lowest level since January 3, 2021.

Meanwhile, between January and March 2022, Terra’s TVL surged 116% to hit $19.8 billion. Similarly, Waves’ smart contract deposits increased from $730 million to $4.5 billion over the same period.

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 those cases.

Avalanche DApps 30-day data. Source: DappRadar

As shown by DappRadar, on April 1st, the number of Avalanche network addresses interacting with decentralized applications decreased by 16% from the previous month. In comparison, the Solana network saw a 6% increase in users while Ethereum declined 11%.

While Avalanche’s TVL has been hit the hardest compared to similar smart contract platforms, there is solid network usage in the decentralized finance (DeFi) segment.

The above data suggests that Avalanche is losing ground to competing chains. With AVAX up 43.8% in 17 days, some holders might feel uncomfortable if the decentralized application network continues to release weak TVL and DApp usage data.

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