Is It Worth Investing In Avalanche?

Last Updated February 2nd 2022
15 Min Read

Since the invention of Ethereum and smart contracts, there have been many blockchain projects claiming to be the ultimate Ethereum killers. Avalanche (AVAX) is one of these projects, and it offers a lot of features that could make it a major player in the blockchain space.

First and foremost, Avalanche is designed to be highly scalable. It can handle more transactions per second than Ethereum, which is essential for any platform that wants to compete with the giant. Additionally, Avalanche is created with zero-knowledge proofs, so users can anonymously send and receive money on the blockchain.

On top of that, Avalanche is also eco-friendly, as it uses only a fraction of the energy needed to mine Ethereum or Bitcoin. However, we cannot really consider this aspect as a major threat for Ethereum and other competing platforms which are also trying to turn their miners into renewable energy sources.

Avalanche is still in its infancy, and it will need some time before being able to compete with big players from the crypto space. AVAX, Avalanche's native token, recently spiked in price and briefly became the 10th most valuable cryptocurrency by market cap. This could be an early sign of good things to come for the project. However, you will want to do your own research before taking the plunge.

In this guide, we will look at what Avalanche is, how it works, and what its prospects are. We will also analyse its performance as an investment to help you decide whether you should invest in Avalanche (AVAX) or not.

Contents:

 

What Is Avalanche (AVAX)?

Avalanche is an open-source, decentralized blockchain platform that is focused on achieving the best possible transaction speeds and costs. It has its own native token, AVAX, which is used to power smart contracts within the ecosystem.

Avalanche's main goal is to become better than Ethereum in every aspect, including scaling. According to the developers, Avalanche is capable of processing 4,500 transactions per second, while Ethereum can manage only 13 TPS.

Avalanche differs from other existing blockchain platforms in several aspects. First of all, it runs three blockchains in parallel – the Exchange Chain, Contract Chain and Platform Chain. Each chain is responsible for a different task, which allows Avalanche to be more efficient and scalable than other blockchains.

Second of all, Avalanche uses zero-knowledge proofs, which allow users to make transactions anonymously. This is a major advantage over blockchains like Ethereum, which require users to reveal their identities in order to use the platform.

Finally, Avalanche is also designed to be more energy-efficient than other blockchains. It consumes only a fraction of the energy needed to mine Bitcoin or Ethereum. This will allow the platform to scale faster than others until it becomes more popular and energy-efficient mining hardware is developed.

Avalanche was developed by Ava Labs. The team is led by President John Wu, who has a background in cryptography and cybersecurity. He previously founded several companies, including Sureview Capital, which was an early-stage venture capital firm.

Ava Lab’s blockchain platform was announced back in May 2019 after being secretly developed for over a year. The team has been working on Avalanche ever since, and the project is now entering its final development stages.

How Avalanche (AVAX) Works

Avalanche runs three blockchains in parallel, each of which specializes in a different task:

  • The Exchange Chain (X-Chain) is responsible for handling the exchange of assets between users. This is the fastest part of the Avalanche platform, as users can exchange digital currency within a few seconds.
  • The Contract Chain (C-Chain) is responsible for processing smart contracts and carrying out transactions that require arbitration. This chain is EVM-compatible which means that any smart contracts created on the Ethereum Virtual Machine (EVM) can be run on Avalanche.
  • The Platform Chain (P-Chain) allows developers to create their own layer one or layer two blockchains known as subnets. Subnets are secondary blockchains that use Avalanche’s Platform blockchain as their foundation. Developers can select the features and footprint of each subnet in order to optimize them for different tasks and requirements.

Avalanche runs on the Proof-of-Stake algorithm. The network requires users to have a minimum balance in order to participate in the staking process, which helps Avalanche reach consensus quickly while ensuring financial incentives for miners.

Avalanche also has a feature known as the Avalanche Bridge, which allows users to quickly swap ERC-20 tokens. This means that you can easily transfer your ERC-20 tokens from Ethereum to Avalanche and vice versa.

The native token of Avalanche is called AVAX. It is used to power smart contracts and transactions within the ecosystem.

AVAX can also be used to pay for goods and services within the Avalanche network. At the time of writing, there were a total of 395,891,290 AVAX with a circulating supply of 245,011,886.37 AVAX.

Check Out: Should You Buy Avalanche (AVAX)? 4 Pros, 4 Cons

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Avalanche (AVAX) Price History 

AVAX has not been in the market for long. The coin was launched by Ava Labs in September 2020, which means it has only been trading for about a year. However, given its fast growth in the crypto industry, AVAX has already created a pretty interesting price trajectory. 

According to historical price data from CoinMarketCap, AVAX’s earliest known price is about $4.1 back in September 2020. This means that Avalance began trading at a much higher price compared to most new coins. 

For instance, its rival Ethereum began trading at a price of $0.31 during its ICO in August 2014. That is about 1,222% less than AVAX’s launch price. 

Of course, AVAX couldn’t survive above $4 per coin for long. Towards the end of December 2022, the coin went down to as low as $2.79, which is its current all-time low price. Fortunately, since the beginning of 2021, the coin has not gone below $4 again. 

Early 2021 was generally a very favourable period for cryptocurrencies. Between January and May, there was a market-wide bull run that saw most coins grow parabolically and attain new milestones. 

Compared to its later growth, we can’t say that AVAX took full advantage of this bull market. However, it did record some plausible growth; going from $13.23 on 1st February 2021 to $55.3 per token three days later. 

Although the price crash that followed was not as devastating as that of most coins, AVAX dropped to as low as $23.5 by the end of February. 

From there, AVAX saw some price fluctuations, mostly bouncing between $23 and $37 until mid-May, when it began dropping and went to as low as $9.7 towards the end of July. 

Interestingly, as most coins were struggling to recover from the bear market that popped in around  May, AVAX began growing even faster than it did during the market-wide bull run that began in January. By mid-August, it had gone back to above $20, then quickly jumped to $55.35 on August 24th, 2021. 

It fluctuated a bit and went back to about $37 in early September before spiking again to $76.42 towards the end of that month. This was followed by another drop to about $54 in mid-October. 

Now, from here, AVAX adopted an uptrend that would see it attain its current all-time high price of $146.22 on November 21st, 2021. 

Again, it dropped to just below $80 in early December and at the time of writing it was trading at $72.75.

Avalanche (AVAX) Price Predictions For 2022 And 2023 

Although AVAX began trading in 2020, it saw the most growth in 2021. By December, the coin had grown 3,851% since the beginning of the year. We expect 2022 and 2023 to be even more exciting for this coin, with most price analysts predicting a positive outlook. 

For instance, Wallet Investor predicts that Avalanche (AVAX) will trade around $100 in the first months of 2022. There will be a few price drops in between, which is unlikely given AVAX’s price history. 

However, these are reasonable predictions, and we might see Avalanche (AVAX) almost touch $200 per coin by the end of 2022, finishing at $196.46. 

By 2023, Wallet Investor is positive that the Avalanche coin will keep rising in value. It might start the year at around $197.54 per coin and close at $332.49.

That is a projected annual growth of about 69%, which is a bit conservative compared to AVAX’s past growth. 

Again, Wallet Investor doesn’t see any major price drops in 2023. The growth will mostly be linear with no significant dips. 

Gov.capital is perhaps the most bullish when it comes to the future of Avalanche. The site predicts a speedy growth that will see Avalanche (AVAX) trade around $105.92 at the beginning of 2022 and close at $315.39 per coin. That is more than what Wallet Investor predicts but still within the same price range. So, from these, we can assume that Avalanche (AVAX) will close 2022 at least $190 per coin and might also go beyond $300. 

In 2023, Gov.capital predicts that Avalanche (AVAX) will start at $324.08 and finish at as high as $701.01 per coin. That is quite bullish, and if it were to come true, investors will reap big profits, and Avalanche will attract even more users aboard. 

Of course, there are some bearish predictions. For instance, Priceprediction.net predicts that AVAX will 2022 and 2023 at $114.79 and $163.59, respectively. That would be a really drudgy growth and not one that any investor is looking forward to. 

All in all, we expect Avalanche (AVAX) to have positive growth in the future, with the price playing between $200 and $300 by the end of 2022 and between $300 and $600 by the end of 2023. 

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How To Invest In Avalanche (AVAX)

If you believe Avalanche (AVAX) will make a good addition to your portfolio, there are several ways you can invest in it.

The easiest way is to purchase AVAX tokens on exchanges such as BitForex, CoinBene and Hotbit. You can also buy AVAX tokens with other cryptocurrencies such as Bitcoin, Ethereum and Tether.

Generally, we recommend investing in AVAX using three methods. these are:

  • Holding
  • Trading
  • Staking

Method 1: Holding

If you believe in the long-term potential of Avalanche, you can buy AVAX tokens and hold them for a period of time. This will allow you to benefit from any increases in value over the long run.

However, you must remember that cryptocurrencies are volatile, and there is always the risk of price fluctuations. So, while holding is the easiest way to invest in AVAX, there are no guarantees that you will make any profits.

In order to start holding (or hodling), you will need to buy Avalanche tokens from an exchange then transfer them to a secure wallet. There are several wallets that you can use for this purpose. 

The most common ones are:

  • Hardware wallets such as the Ledger Nano S and Trezor.
  • Software wallets such as MyEtherWallet and Exodus.
  • Cloud wallets such as the default Coinbase and Binance wallets

If you are looking for security, we recommend using a hardware or software wallet. Cloud wallets are less secure, but they are easier to use.

Method 2: Trading

Another way to invest in AVAX is to trade it on an exchange. This involves buying and selling AVAX tokens in order to make profits from price fluctuations.

Trading can be risky, but it also has the potential to generate higher returns than holding. In order to trade AVAX, you will need to first purchase it from an exchange.

After that, you can start investing in one of several ways:

  • Buy low and sell high
  • Short-sell
  • Enter into a leveraged position

All of these methods involve taking on additional risks, but they can also lead to higher profits. If you are not familiar with trading, we suggest that you consult a financial advisor before starting.

When it comes to exchanges, there are several that you can use. They include Binance, Coinbase Pro, KuCoin, Gate.io, Crypto.com, OKEx and many more.

Method 3: Staking

The final way to invest in AVAX is by staking. This method involves locking up your tokens in return for rewards.

Staking Avalanche (AVAX) is fairly straightforward. You simply need to send your tokens to the staking address then wait for them to be verified. After that, you will start receiving rewards based on the number of tokens you stake.

In order to start staking AVAX, you will have to meet the following requirements:

  • Stake a minimum of 2,000 AVAX to become a validator
  • Stake a minimum of 25 AVAX to become a delegator
  • Stake for at least 2 weeks to become a delegator and 1 year to become a validator
  • You have to pay a minimum delegation fee of 2%

As a validator, you will be rewarded as long as you are online and active during at least 80% of the staking period. In order to make the most from staking, you should aim to be online 100% of the time.

Staking has several benefits, which include:

  • Higher rewards than holding or trading
  • No risk of price fluctuations
  • A chance to vote on important decisions within the Avalanche network

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Is Avalanche (AVAX) A Good Investment?

This is a tricky question to answer at the moment.

The altcoin market has experienced several price declines recently, with coins such as Bitcoin losing up to 70% of their value in recent times. With that in mind, it’s almost impossible to predict whether or not an investment in AVAX will be profitable.

That said, Avalanche is a highly promising project with a lot of potential. If you believe in the team and the technology, then it might be worth investing in AVAX. However, we recommend that you do your own research before making any decisions.

In general, though, there are several reasons why we believe AVAX could be a good investment:

1. AVAX is growing fast

Although Avalanche was only released in 2020, it has quickly grown to become one of the top ten most popular blockchains in terms of market cap.

Towards the end of November, AVAX grew and was briefly ranked among the top cryptocurrencies by market capitalization. The coin has also grown more than 3,000% in the last year and has an ROI of about 16890.3%, according to CoinMarketCap.

2. The project has a great team

The Avalanche team is composed of experienced developers and engineers who have a proven track record in the blockchain industry. Most of the team members previously worked in Fortune 500 companies such as Google, Microsoft, Cisco, Accenture, Capital One, AT&T, NASA and Viacom, among others.

This means that the project is in safe hands and is likely to succeed.

3. The technology is sound

Avalanche has a unique architecture that allows it to scale much better than other blockchains. The platform uses a technique called “sharding” which splits the blockchain into several parts, allowing it to process more transactions simultaneously.

The use of three blockchains also enhances scalability by reducing the computational power required for each transaction.

4. AVAX is eco-friendly

Avalanche is one of the most eco-friendly blockchain platforms in the world. It uses a unique consensus algorithm that doesn’t require energy-hungry mining and is therefore very low on energy consumption.

5. The community is growing

Customers and investors are always important when it comes to a project’s success, especially in the cryptocurrency market. The Avalanche team recently launched a program to encourage more people to join the network as validators.

They have also been focusing on educating users about how Avalanche works and encouraging them to use AVAX.

6. Growing demand for decentralized applications (dApps)

Many people are starting to realize the potential of blockchain technology. This is due to the growing use of decentralized applications, which have several benefits over their centralized counterparts.

For example, dApps are fully transparent, and users can be sure that they’re not being scammed, unlike centralized apps where the developer has full control over everything.

As the world moves towards a more decentralized future, the demand for dApps is only going to increase. Avalanche has the potential to become one of the leading platforms for developing dApps.

7. It is much better than Ethereum

One of the biggest advantages of AVAX is its improved speed. For example, Ethereum can only process around 15 transactions per second. On top of that, Ethereum transactions are very expensive at the moment.

AVAX, by comparison, offers 4,500 orders of magnitude, which provides massive scalability and cheap token transfer costs. This could be a major advantage for Avalanche.

All these are good reasons why we think AVAX could be a good investment. However, also keep in mind that there are factors that might hinder the growth of Avalanche.

These include competition from similar projects, government regulations, high volatility, the lack of an active community and others. All things considered, though, if you are considering investing in AVAX, now could be a good time to do it.

Read Also: Why Avalanche Is Going To Explode

Conclusion: So, Should I Buy AVAX Tokens?

That depends on your risk profile and how much you are willing to invest. If you are considering long-term investing, Avalanche (AVAX) is certainly worth considering as the project has several advantages over Ethereum. At this early stage of development, it also appears undervalued compared to its peers.

The project does face some challenges, but if the team succeeds in overcoming these, Avalanche could become one of the most important blockchain platforms for developing decentralized applications.

We recommend that you do your own research before investing in any cryptocurrency. This way, you can form your own opinion about whether Avalanche (AVAX) is a perfectly timed investment or not.

As with any other type of asset, there are always ups and downs when it comes to price. So it’s up to you to decide whether you think the current price is good or not.

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

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