AVAX has been consistently rising but Avalanche network use is declining which is worrying for the investors.
AVAX has surged over 40% since the second half of March 2022. Currently, it is trading for $103, the highest level since January.
Avalanche uses a Proof-of-Stake model and has amassed $9 billion in Total Value Locked (TVL) deposited on the network’s smart contracts.
New Initiative May be Behind AVAX Rally
Analysts attribute the rally to Avalanche’s incentive program to accelerate the adoption of subnets which was announced on March 8. According to the Avalanche Foundation, subnets enable functions that are only possible with “network-level control and open experimentation.”
The program will allocate up to 4 million AVAX, worth around $340 million, to fund Decentralized Applications (DApps) focused on gaming, Non-Fungible Tokens (NFTs) and Decentralized Finance (DeFi) applications.
Wes Cowan, managing director of DeFi at Valkyrie Investments, added that “Avalanche’s subnet with KYC infrastructure, will be a massive step forward for institutional adoption.”
Even with such massive steps towards expansion of the network, the price of AVAX is still around 30% below its $147 all-time high and the token holds a $26.3 billion market capitalization.
Avalanche is also Ethereum Virtual Machine (EVM) compatible and it is not plagued by the $15 average transaction fees and network congestion that impact the Ethereum network.
Avalanche Smart Contract Use is Declining
As shown above, Avalanche‘s DApp deposits peaked at 132.8 million AVAX on March 14. Currently, it stands at 94.6 million, a drastic reduction since the peak. In dollars, the current $9 billion TVL is 24% below its $12.2 billion all-time high in December 2021.
One should also check the DApp usage metrics, as TVL does not provide the complete picture. Some DApps, such as games and collectables, do not require large deposits, so the TVL metric is irrelevant in those cases.
According to DappRadar rankings on April 2, most of the top 25 Avalanche DApps have recorded a slump. Other chains like Solana have recorded an increase during the same period.
Even though AVAX has risen by over 40% in the past couple of weeks, the declining use of its network, weak TVL and DApp usage are matters of concern among its investors.
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