AVAX falls 4.9% to $6.57 as short sellers pile into falling market

AVAX fell 4.9% to $6.57 as open interest climbed and funding rates turned negative, signaling aggressive short positioning on Avalanche's native token.

"Short sellers are gaining conviction as AVAX breaks below the $6.50 support zone that held for two weeks," Coinglass data showed, with open interest rising to 2.79 million contracts as of 14:00 UTC. The spot cumulative volume delta declined noticeably over the same period, confirming steady selling pressure on centralized exchanges.

The funding rate slipped to negative 0.0011%, meaning short positions are paying longs a small premium to maintain their bets. AVAX traded between $6.469 and $6.662 in the past 24 hours, with the $6.50 level now acting as resistance after flipping from support. Bitcoin's drop below $65,000 added macro pressure, dragging Avalanche and other altcoins lower alongside the broader market.

The dense cluster of short liquidations between $6.70 and $6.85 creates short squeeze risk if buyers step in, but the path of least resistance remains lower. A daily close below $5.89 — the base of the consolidation range that has held since May — would open the door toward $6 and below, invalidating the recovery structure.

Avalanche, a Layer-1 blockchain built on the Snowman consensus protocol with a three-chain architecture, has seen its token underperform as network activity metrics fail to translate into price support. The Avalanche C-Chain, which handles EVM-compatible smart contracts, processed a 20x surge in daily transactions in recent weeks, yet the price stalled near $7 before reversing lower.

The $7.08 swing high tested in early July was not broken, and the subsequent rejection has dragged prices into a two-week range between $6.38 and $6.78. That range has now broken to the downside, with the $6.40 support zone breached in the current session.

Santiment's latest ranking placed Avalanche third among blockchain projects in real-world asset development activity, behind Hedera and Chainlink, based on GitHub commits. The RWA narrative has been a key growth thesis for Avalanche, which has positioned itself as institutional-grade infrastructure for tokenization. However, development activity has not translated into near-term price support.

Traders maintaining a bearish bias should watch for a potential short squeeze. The two-week AVAX liquidation heatmap shows a dense cluster of short liquidations in the $6.70 to $6.85 zone, which could act as a magnetic price target if buying pressure emerges. Any sudden reversal could force short sellers to cover, accelerating a rally toward that zone before the broader downtrend resumes.

This article is for informational purposes only and does not constitute investment advice.