Analyzing Avalanche’s Ecosystem Growth
Diving into the key metrics and catalysts leading to an all-time high in transactions on the Avalanche blockchain
Avalanche, a key player in the EVM ecosystem, has been instrumental in fostering the development of new and innovative sectors for quite some time. Currently ranked as the 7th chain in terms of Total Value Locked (TVL), Avalanche has a TVL of $650 million and supports over 30 decentralized applications (dApps) each with a TVL exceeding $1 million. One of the primary advantages of Avalanche over Ethereum is its low-cost transaction fees, enabling users to engage with the Decentralized Finance (DeFi) ecosystem without incurring prohibitively high gas costs.
Avalanche has recently experienced a surge in price following the announcement of its partnership with JP Morgan and Citi. Both financial giants are experimenting with real-world asset (RWA) tokenization using Avalanche’s technology. RWA tokenization stands as the next significant breakthrough in the cryptocurrency space. It essentially entails digitizing traditional assets like gold, commodities, treasuries, and real estate, and representing them on the blockchain. In July, the Avalanche Foundation unveiled Avalanche Vista, a $50 million initiative aimed at investing in the tokenization of RWA.
JP Morgan’s Onyx platform is utilizing an Avalanche subnet to link portfolios with tokenized assets provided by WisdomTree. This proof-of-concept showcases the capabilities of blockchain, smart contracts, and tokenization in simplifying portfolio management. This is especially significant for alternative assets, which have traditionally been difficult to trade and manage. The influx of traditional finance heavyweights into the ecosystem is expected to significantly contribute to its growth. It is believed that the business brought in by these blue-chip institutions will have a cascading effect, benefiting various facets of the ecosystem.
The excitement surrounding these developments could already start to become evident. The week of October 23rd saw the highest influx of funds into Avalanche via bridges in six months, recording total inflows of $19.24 million. Additionally, there has been a notable increase in inflows into Avalanche over the last two quarters of the year. The third quarter marked a total of $79 million in net inflows, while the fourth quarter, only in its last week of November, has already seen $56 million in net inflows. This trend signifies a significant uptick compared to the $66 million and $62 million recorded in the first and second quarters, respectively.
Moreover, this surge in inflows is not the only recent development in the Avalanche ecosystem. There have been other significant advancements and activities contributing to its growth. Recently, Avalanche has experienced a surge in transactions for inscriptions, mirroring the trend seen with Ordinals that previously impacted Bitcoin, Litecoin, and Dogecoin. On November 20, the transaction count on Avalanche’s C-Chain achieved a new record, reaching an estimated total of 3.07 million transactions.
Consequently, this impact was also observed in the transacted volume across the chain, which achieved a new annual peak with $2 billion transacted during the week of November 13, 2023. Throughout this period, the block time to finality remained stable at approximately one second. Additionally, the gas price stayed around 80 AVAX, leading to an average cost of $0.05 per transaction.
The Avalanche ecosystem is likewise exhibiting indications of maturity with its AVAX token. This is evident as the concentration of whales has been decreasing while the number of holders has been increasing.
The concentration of whale holders in the Avalanche ecosystem has significantly reduced, dropping from 62% two years ago to currently 43%, marking a notable shift over the past two years. A high percentage of whale holders can sometimes be interpreted as a concerning sign, as it might indicate a potential threat to the stability of the token’s price. Similarly, the number of holders in this context has increased significantly, rising from 776,000 to 6 million over the last two years. These two statistics illustrate a more decentralized distribution of holders, coupled with a lower concentration of whales, effectively highlighting the maturity and growth of the ecosystem.
The Avalanche ecosystem has been experiencing growth and innovation, highlighted by its recent partnerships with major financial institutions like JP Morgan and Citi for real-world asset tokenization. This has led to a significant increase in bridge inflows. Moreover, the record number of transactions in the network comes to represent the increasing demand for ASC-20 minting transactions. Finally, the decrease in whale concentration and a substantial rise in holder numbers for AVAX shows significant maturation and decentralization. These developments not only underscore Avalanche’s expanding influence in the crypto space but also signal the growing integration of traditional finance and blockchain technology.
