Market Context

We're currently observing an interesting situation with AVAX. The daily bearish trend has been well-respected, with lower highs set on key dates:

• March 22nd, 2024: Swing high around $40.
• July 23rd, 2024: Lower high around $31.
• August 25th, 2024: Recent lower high around $25-$26.

This has established a clear bearish trend with lower lows and lower highs. While we're not outright bearish on AVAX, we are anticipating further downside given the current trend, especially since the trend line has been respected once again.

Market Mechanics

Several key factors are influencing the current market mechanics for AVAX:

Funding Rate:

Between July 23rd and August 24th, the market showed a bias toward shorting AVAX. Notably, on August 5th, the funding rate hit 0.0447%, and on August 16th, it ramped up to 0.374%. This indicates that shorts were paying a premium, likely contributing to the 40% bullish surge we observed-a significant move upward that served to rebalance the market.

Demand Zones:

We know there's strong demand around the $19-$21 range, as evidenced by the historical rally in December that led to a 150% surge. With the market currently forming a short-term bearish trend toward this accumulation zone, it presents an interesting opportunity.

Note this willingness for the market to be short reiterates our belief we will see short term downside when coupling the funding rate readings with the clear short term bearish structure. This is only positive for buyers for the long term as it gives a high probability those wanting to get a better price will be able to do so

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

---

Playbook

Hypothesis

We're still holding onto the idea that the $19-$21 zone is critical for AVAX. Given how the market is setting up, we could see prices dip into this zone, offering a really attractive risk-to-reward scenario. If price action holds around here, this could be the launchpad for a significant move, just like we've seen in previous cycles.

Key Levels

$19,820 - $21,750: This is our accumulation sweet spot, based on historical support levels. $17,390: This is the swing low from August 5th, which should serve as a potential stop-loss level if you're thinking about using leverage.

Risk Management

Spot Accumulation

The safest bet here is to accumulate spot within the $19-$21 range. This lets you build a position with less risk and gives you the flexibility to ride out any market swings while holding for those long-term gains.

Leverage Strategy

If you're looking to get more aggressive, light leverage-like a 2x or 3x-could be on the table, especially if we get closer to the $21.750 level. The stop loss should be set below $17.390 to protect your position. The key here is to weigh the reward against the risk carefully. If it makes sense and the reward justifies it, then leveraging a bit could be a smart move. But, like always, be ready to adapt if the market moves against you.

Cryptonary's take

AVAX is setting up for what could be a really solid play, especially if we get into that $19-$21 accumulation zone. The market mechanics are lining up, with funding rates and demand zones pointing towards a potential continuation of the trend, or even a reversal.

If you're in this for the long haul, accumulating in this range seems like a no-brainer. And if you're a bit more aggressive, some light leverage could pay off big time-just manage your risk carefully. Overall, AVAX is a high-conviction play right now, with plenty of upside if things go our way.