Will AVAX retest the $25 mark if open interest crosses the $200 million mark?

Avalanche price stagnated at around $21 on Thursday, August 15, holding above the $20 support level since the beginning of the week. Data from the derivatives market shows an increase in open interest in AVAX over the past three days, potentially indicating a major breakout.

Bears increase pressure on $20 support

Avalanche posted double-digit gains last week during a remarkable rally fueled by the approval of Solana ETFs in Brazil. That event boosted investor sentiment toward layer-1 Proof of Stake (PoS) coins like AVAX. However, the media excitement has died down, leaving Avalanche struggling to attract new buyers this week.

After last week’s 31.94% increase that peaked at $22.79 on August 9, Avalanche’s bullish momentum has slowed down. At the time of writing on August 15, Avalanche is trading at $20.85, down 8.79% week-to-date.

As can be seen from the attached price action chart, Avalanche’s price has been consolidating in a tight range for the past four days, suggesting that bullish catalysts in the background could negate any sell-off attempts.

Bears have attempted to push the price below the psychological support level of $20. Nevertheless, AVAX bulls have built a strong buy wall preventing a downward reversal. This consolidation, combined with stability around $20, could indicate the potential for an imminent breakout.

AVAX open interest exceeds $200 million after dovish CPI data

The release of dovish CPI inflation data by the US Bureau of Labor Statistics on August 14 is one such bullish catalyst. The data showed a slowdown in inflation, a positive factor that, while not immediately reflected in AVAX’s spot market, changed the sentiment in the derivatives markets.

Open interest, a key metric for price insights, has seen a significant increase. From $182 million on August 12, Avalanche’s open interest rose to $201.6 million by August 15. This represents an increase of $19.6 million or approximately 10.77%, as shown in the attached chart. During this period, AVAX’s price remained relatively stable, further indicating potential bullish momentum.

When open interest increases during a period of price consolidation, as is currently being seen, it is often a sign that a significant price move is imminent. Two reasons why this could be positive for AVAX are traders’ regained confidence in the asset and the possibility of a short squeeze if bears are unable to push the price below key support levels.

AVAX Price Prediction: Impending Breakout from $20 Support

The combination of technical indicators and market sentiment suggests that Avalanche is preparing for a breakout from the $20 support level. The Parabolic SAR (Stop and Reverse) indicator, as seen in the price action chart, is currently showing support at $18.17. This suggests that while the bears have attempted to push the price lower, they have not yet managed to break this key support level.

Additionally, the Donchian channels that measure volatility are narrowing, indicating less price movement. This often precedes a significant breakout. With resistance at $23.42, a break above this level could see AVAX retest the $25 mark.

In summary, if AVAX maintains its current support and open interest continues to rise, a bullish breakout is becoming increasingly likely. Traders should watch for a decisive move above $23.42, which could signal the start of a new uptrend towards $25 and beyond.