In this guide, we will voice our own and market’s opinion on Avalance future while discussing AVAX price forecast for 2021 and beyond.
Please bear in mind that you should take this and any other prediction with a grain of salt since predicting anything is a thankless task, let alone predicting the future of a novel, highly volatile financial asset like Avalanche.
Now, let’s head into it.
Before we delve deep into the Iota price prediction and answer questions if Avalanche is a good investment or not, why will Avalanche succeed or fail or why will Avalanche price rise or drop, let’s quickly throw a glance at what is Avalanche and its to date history.
What is Avalanche
Avalanche is an overarching platform for launching decentralized finance (DeFi) applications, financial assets, trading and other services.
The goal is to be something of a global assets exchange, allowing anyone to launch or trade any form of asset and control it in a decentralized manner using smart contracts and other cutting-edge technologies.
Team behind the project is Ava Labs and Developers at Ava Labs claim that Avalanche is the first smart contracts network to offer transaction finalization in under one second as standard.
AVAX launched its mainnet in September 2020. The platform’s native token, AVAX, performs various tasks within Avalanche and also functions as a rewards and payment system for users.
Avalanche is the first smart contracts platform that can confirm transactions in under one second, supports the entirety of the Ethereum development toolkit, and enables millions of independent validators to participate as full block producers (Avalanche had over 1,000 full, block-producing nodes on its Denali testnet).
In addition to supporting transaction finality under one second, Avalanche is capable of throughput orders of magnitude greater than existing decentralized blockchain networks (4,500+ transactions/second) and security thresholds well-above the 51% standards of other networks.
What is the Avalanche (AVAX) Token?
AVAX is the native token of Avalanche. It is a hard-capped, scarce asset that is used to pay for fees, secure the platform through staking, and provide a basic unit of account between the multiple subnets created on Avalanche.
How Is the Avalanche Network Secured?
Avalanche is a proof-of-stake (PoS) protocol which rewards users for staking coins. PoS networks have come under fire for their low attack cost, which in some cases has exposed serious vulnerabilities.
According to Ava Labs, Avalanche gets around this by changing governance to make it all but impossible for an attacker to covertly gain the necessary consensus.
Avalanche Price Prediction 2021
Many investors (traditional and crypto) will tell you that fundamentals are extremely important and should carry the most weight when you assess a project. We agree with this claim, to an extent.
Crypto is specific in a sense that fundamentals are hard to rely on. How come?
Well, most of the crypto investors are not technologically refined to understand if it is even feasible to do what the project claims to be doing. This leads to exaggerated and unsubstantiated roadmaps by many crypto project teams. These roadmaps sound terrific and people flock to invest in the project even though, with a little technical or economical knowledge, they would have seen how ridiculous some of those ideas are.
⚡️ Use case
For this reason, it is always good to check the feasibility of the use case by consulting someone more technically astute.
For example, a lot of these projects noticed the transaction speed issue with Bitcoin so they went all-in with how fast their blockchains are. But that speed came at a cost of decentralization. Essentially, they claimed to have solved a blockchain trilemma, which bugged geniuses for centuries. But some twenty-something no-names solved it in a week or so.
Use case is not very original. Yet another smart contracts platform that aims to be faster and more efficient than Ethereum. Making ground on ETH will be a steep hill to climb. However, the technology behind Avalanche does have revolutionary potential. Avalanche is capable of processing higher throughput than Visa (4500 tps per subnet), sub-second finality, low gas fees, offering unparalleled decentralization by being able to scale the number of validators to millions with their revolutionary consensus protocol, as well as offering a highly customizable interoperable heterogeneous platform.
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Assessing the team behind the project is another point that needs to be addressed. More often than not, those people will be the only source of their claims (and doctored LinkedIn profiles). So, even though this is an important criterion, bear in mind that a cunning team of marketers can fake legitimacy.
One huge RED FLAG about a team is tweeting, posting, blogging about the price of their token. No legitimate team does that as they have smarter things to do – like work on a multi-million dollar project of theirs. Only money grabbers run their official social media and blogs as the most blatant market manipulators (example: Justin Sun) to run the price up before they dump their mountains of coins they created out of nothing and awarded to themselves.
Such teams usually pay off low-tier crypto media publications to post “unbiased” articles and reviews of their projects in an attempt to create an illusion of a widely respected and attractive project.
Very transparent and professional, lead by Emin Gün Sirer, a professor at Cornell and a well-known crypto figure. No social media account does price action shilling or commenting. Instead, they are focused on building with regular updates on development progress, hackathons, technological partnerships and ecosystem growth.
Community – pay special attention to this one. Size of the community is not relevant as it can easily be faked (just check Fiverr or Upwork to see how easy is to buy 100k of Twitter followers or subreddit subscribers).
What is more important is the content those community members post – does it look real? Is it only price-centered? It it allowed to exercise some critical thinking or the only posts allowed are shills and cult-like idolizing of the team (most often the team leader gets a rockstar status among the sheepish investors).
Low to moderate activity on their subreddit with a noticeably growing activity. There are pretty active Telegram and Discord groups. Seems to be genuine and authentic, no bots and no low-quality posts about price action and getting rich quick convo.
⚡️ Exchanges and wallet support
Another good indicator of how serious is the project taken by other crypto agents. Some smaller and marginal exchanges and wallets can be paid off for listings but larger platforms like Kraken, Binance or Coinbase lend legitimacy to a project that is listed there. So, that is a great cue if the project is actually worth something among its peers.
Very good support among the popular exchanges (Binance, FTX, OkEx etc). However, wallet solutions are still lacking and many popular multi-currency wallets like Atomic Wallet, Trust Wallet etc. are yet to integrate AVAX network. However, Avalanche has its own Avalanche Wallet, non-custodial wallet that works with Ledger Nano X and S.
Sometimes the project makes sense and everything sounds right except of the token role. It is just superfluous and forced into the picture (so the team can take the money and get rich). Aside of the logic behind the token, you should pay attention to its current and overall supply. Also, inflation and new coins production rate is extremely important. Distribution among the team, early investors and regular users is also of immense consequence. Check Ripple and XRP to see how hard is to have organic price growth when there is a whole slew of people who dump millions of new (unlocked) tokens into the market each week.
It is important that tokens are woven into the project with clever incentives in mind. It is all about incentives in the world of crypto – why should the buyer hold some coin, what is in it for him? Different projects use different methods to entice people to buy and hold their coin.
Tokenomics of AVAX are solid.
The token distribution details were as follows: 360 Million AVAX were minted at launch, whilst the other 360 Million will be used as Staking rewards released over decades. Avalanche has a fixed capped supply of 720 million, creating scarcity. 360 Million tokens were minted at launch (with the vast majority locked up in vesting periods between 1 and 10 years) whilst the other 360 million are used for rewards for staking. As with Bitcoin, reward rates will decrease over time as it gets closer to the capped supply
The private token sale included prominent venture firms such as Andreessen Horowitz (a16z).
Fees for all sorts of operations on the network are paid out in AVAX. These are then burned, reducing the supply, and increasing the scarcity of AVAX for all token holders. If the number of AVAX burned exceeds the amount minted in staking rewards (which can be controlled through governance) then this creates deflationary pressures.
⚡️ Trading volume
Trading volume is another excellent barometer of the quality of the assets. This can also be faked by automatic and wash trading on small exchanges but, just filter those out and see if there is actual liquidity on the bigger platforms.
Solid and consistent trading volume in the last 3 months with ocassional spikes and drops. It usually moves between $200 million to $1 billion of daily trading volume which means AVAX is very liquid and easy to buy or sell off.
Now, we’re talking about the really impactful market forces.
Unfortunately, the power of social media, especially Twitter, Discord, and Telegram groups and to a smaller extent subreddits and Facebook groups, often outweighs the fundamentals of a crypto project. As a consequence, we see trash and half-dead zombie projects like Dogecoin, Electroneum, Verge, Tron (not dead but everything is faked around it, from the number of users and dapps to the unoriginal and uninspiring, incompetent leadership) and similar shitcoins rising up in the market cap rankings, sometimes even entering the top 10.
The speculative wave can lift you into the skies but can, more often, smash your portfolio into a big zilch.
Some people are good at swimming with these sharks (Twitter personas hidden behind some lame nicknames like Crypto [INSERT ANIMAL) or Crypto [INSERT VERB]) that coordinate their shilling and price pumps and dumps. However, ordinary crypto buyers have no time or skills to keep up with them and are used as a plankton – food for the bigger crypto sea creatures to feast on.
Nevertheless, social media can be a place you run into some good tips about hidden gems. When you read something that sparks your interest, don’t get overexcited and invest right away. Instead, put it on a watchlist and check all of the stuff we mentioned above.
The key thing to look for is authenticity – does the community, social media posts of crypto personas, articles about the project on crypto media look legit? Is it posted by the well respected people with a strong reputation or by no-names who shill coins left and right? Is the community aware of potential flaws of the chosen project and is it allowed to discuss them? Are there systemic complaints of sudden bans and censorship by the community moderators?
A good project is not that hard to recognize and once you see posts about it by other people – check their profiles, check their tweet/post history, see if the recommendation comes across as a genuine suggestion or an artificial shill made out of self-interest?
Avalanche seems to garner attention of a wide crypto base, tweets and posts about it on social media seem to be genuine and uncoordinated which means people recognize it as a legit project.
There are a lot of crypto Twitter profiles with $AVAX in their profile descriptions which means they can generate a lof of hype behind every positive move of Ava Labs. These events usually lead to short-term price spikes and long-term brand awareness increase.
Avalanche Price Prediction – summed up
Having analyzed all of the above on Avalanche, we can say that this is a legit project with a tough task in front of it – outcompeting Ethereum and other smart contract platforms. It enjoys a good standing in the crypto circles and could be a worthy investment in the short and long term.
Staking encourages large amounts of tokens to be locked up for long periods of time, reducing circulating supply and when combined with increased demand for the token due to its multifaceted utility, then price is likely to increase significantly.
Where and how to buy AVAX
This is how you can buy Avalanche (AVAX):
- Download an Avalanche Wallet
- Create your AVAX-Adress
- Find an exchange that lists AVAX (Binance) and buy AVAX
- Transfer AVAX from the exchange to your wallet
If you are not happy with Binance or can’t use it for some reason, here are a couple of alternatives:
That is how you buy Avalanche, in a nutshell.
- How to buy Bitcoin anonymously
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However, wallet solutions are still lacking and many popular multi-currency wallets like Atomic Wallet, Trust Wallet etc. are yet to integrate AVAX network. However, Avalanche has its own Avalanche Wallet, non-custodial wallet that works with Ledger Nano X and S.
Measure in Satoshis
You will always want to know if the effort of trading was worth it as opposed to just hodling BTC. You should also account for the time you spent trading as that time also has value.
For example, if you spent 15 hours trading altcoins and you ended up having the same amount of Satoshis, it means you have wasted those 15 hours and would have been better off if you simply held BTC.
Since Bitcoin sits in between the Fiat and Alt Coin sandwich, you should only ever trade in BTC value.
If I invest in an altcoin at .17 cents at 10k Sats and in 6 months, I cash out at .93 cents at 10k Sats. Did I make money in that altcoin?
The answer is no. Your opportunity cost was equal to holding bitcoin since the sat values didn’t move, the price of BTC going up is what netted you your increase in fiat. Not the increase of sats on STEEM.
If, however, you cashed out of STEEM at 20k sats at .93 cents over the course of 6 months, that means you made a profit in satoshi value as well as USD value (through bitcoin).
Constructing a Investment Strategy
I can’t stress enough how important it is to construct an actual investment strategy. Organize what your goals are, what your risk tolerance is and how you plan to construct a portfolio to achieve those goals rather than just chasing the flavor of the week.
Why? Because it will force you to slow down and make decisions based on rational thinking rather than emotion, and will also inevitably lead you to think long term.
Setting ROI targets
Bluntly put, a lot of young investors who are in crypto have really unrealistic expectations about returns and risk.
A lot of them have never invested in any other type of financial asset, and hence many seem to consider a 10% ROI in a month to be unexciting, even though that is roughly what they should be aiming for.
I see a ton of people making their decisions with the expectation to double their money every month. This has lead a worrying amount of newbies putting in way too much money way too quickly into anything on the front page of CoinMarketCap with a low dollar value per coin hoping that crypto get them out of their debt or a life of drudgery in a cubicle. And all in the next year or two!
Keep in mind that a 10% monthly increase when compounded equals a 313% annual return, or over 3x your money. That may not sound exciting to those who entered recently and saw their money go 20x in a month on something like Aave before it crashed back down.
Summing it all up
Consider the individual risk of each crypto and start looking for red flags:
- guaranteed promises of large returns (protip: that’s a Ponzi)
- float allocations that give way too much to the founder
- vague whitepapers
- vague timelines
- no clear use case
- Github with no useful code and sparse activity
- a team that is difficult to find information on or even worse anonymous
While all cryptocurrencies are a risky investments but generally you can break down cryptos into “low” risk core, medium risk speculative and high risk speculative
- Low Risk Core – This is the exchange pairing cryptos and those that are well established. These are almost sure to be around in 5 years, and will recover after any bear market. Bitcoin, Litecoin and Ethereum are in this class of risk, and I would also argue Monero. Allocate most of your funds into this basket.
- Medium Risk Speculative – These would be cryptos which generally have at least some product and are reasonably established, but higher risk than Core. Things like Stellar, Cardano, BNB, NEO..etc.
- High Risk Speculative – This is anything created within the last few years, low caps, shillcoins, DeFi…etc. Most cryptos are in this category, most of them will be essentially worthless in 5 years. Invest a very small portion of your funds and only what you can afford to lose (and I truly mean it because there is a big chance you will lose it all).
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com