While below $28K, the price of Bitcoin is still holding strong for now and, at the time of writing, has been trading at $27,700. The largest cryptocurrency by market capitalization is also up 4.4% over the past week. 

This price action came as the national US debt continues to expand exponentially, with billions of dollars added to it each day. Total United States debt has risen to a record $33.44 trillion after hitting $33 trillion just two weeks ago for the first time.

“At the current pace, the US will add $1 trillion of debt in a month,” noted the Kobeissi Letter.

According to Goldman Sachs analysts, the rising cost of borrowing over the last year due to the Federal Reserve raising interest rates has pushed up the expenses on the US' massive debt load. It cost the government $476 billion, or around 2% of the national GDP, to pay the interest on its debt in 2022, which is estimated to rise to 3% of GDP in 2024 and 4% of GDP by 2030.

Amidst this, Bitcoin has broken out of a downtrend, turning the $27K into support. According to crypto services provider Matrixport's analysts, BTC's price could be headed toward $30,000, though the initial surge on Monday lacked a significant follow-through, with trading volume declining. 

However, unlike Matrixport, Vetle Lunde, senior analyst at K33 Research, noted in a report that the market will likely consolidate and chop sideways in October, providing an extending window for long-term investors to accumulate the crypto asset. 

As Bitcoin remains neutral, Ethereum exchanged hands at $1,639 after the disappointing debut of the first futures-based ETF in the US, while the total crypto market cap is standing at $1.13 trillion. In contrast, after a turbulent start, traditional markets calmed this week as fresh jobs data pointed to a cooling US labor market.

According to the reports, the US economy added 89,000 jobs in September, significantly less than the expected 153,000 and 180,000 in August. This reportedly marked the smallest rise in private sector jobs since 2020.

In the past 24 hours, Trust Wallet emerged as the winner among the altcoins with more than 9% gains, while the popular DeFi lending protocol Aave also recorded an 8% jump in price. Another altcoin enjoying significant traction is AVAX.

Spike in AVAX Price

With a market cap of $3.63 billion, AVAX is the 21st largest cryptocurrency, which jumped 11.4% in value as it went from about $9.20 yesterday to nearly $10.25 early on Thursday. 

As of writing, AVAX has been trading at $10.25, up 5.4% in the past 24 hours, while managing $252 mln in trading volume, an increase of 69% from a day ago. The crypto asset is currently up only 12% in the past week but down 40.5% over the past year.

2023 hasn't been good for AVAX, as ever since it hit about $2.40 in the first few days of February, its price has been on a downtrend. While the token did see some positive price action in April and July, the broad trend remained downwards. And now, AVAX is down about 5% this year so far. 

The price of AVAX actually dipped below $10 late last month for the first time since Jan. 2021, which coincided with decreased network activity within the Avalanche ecosystem. But now, as market sentiments turned bullish, AVAX is also enjoying a strong upward run.

As we saw, for AVAX, $10 is a key support level, and if the price loses momentum and takes a drop, it can very well see $8.6. For now, the Relative Strength Index (RSI) has been well above the neutral 50 mark, and the On-Balance Volume (OBV) has witnessed hefty gains in recent days, indicating bullish momentum and good demand. On the upside, $11.20 presents resistance.

Based on the Global In/Out of Money Around Price (GIOM) data, which depicts the entry price distribution of current AVAX investors, if Avalanche bulls can surmount the initial sell-wall at $15, the AVAX price can even hit $20. This is because 755,280 addresses bought 17.2 million AVAX at an average price of $14.77. But if they decide to book profits, as the price edges toward $15, that can cause a pullback. On the downside, 134,000 addresses purchased 10 million AVAX at the minimum price of $9, providing a support buy wall. 

This positive price momentum was also accompanied by an increase of 36.9% in AVAX open interest at $131.7 million, as per Coinglass.

AVAX is the native token of the Avalanche network, a base-layer network on which software developers can build smart contracts, custom blockchains, and dApps. The token hit its all-time high (ATH) at $144.96 in Nov. 2021, which came after the company behind Avalanche announced that it was partnering with global accounting firm Deloitte to “build more efficient disaster relief platforms” using its blockchain. 

A few months before that, the crypto project announced a $180 million liquidity mining incentive program under which certain DeFi protocols launched on the network, and their users were rewarded in AVAX tokens in addition to regular interest payments. 

However, since the ATH, AVAX has lost a whopping 93% of its value. The protocol was launched in September 2020 by Emin Gun Sirer, who is the CEO of Ava Labs, the company behind the network. A month after the token's peak, Ava Labs was selected by Mastercard as one of five startups to join a program to help build up their businesses. Around that time, Bank of America (BofA) counted Avalanche as a viable alternative to Ethereum in a report.

As a utility token, AVAX is used to pay for fees and secure the platform through staking. Users stake AVAX to validate transactions on the Avalanche blockchain, but for doing so, they aren't rewarded with AVAX. Instead, the tokens are burned, which reduces AVAX's supply and, in turn, supports the value of the tokens the users already own. The token further provides a basic unit of account between the multiple Subnets created on Avalanche.

AVAX is a scarce asset, with its supply hard-capped at 720 million tokens, with an initial issuance of 360 million tokens. 

Click here to learn all about investing in Avalanche (AVAX). 

What's Behind the AVAX Pump?

The most prominent reason for the surge in AVAX prices is the growth of SocialFi on the Avalanche network. This growth was led by Star Arena, which was launched in late September and was once known as Starshares.

Stars Arena is a decentralized social media (DeSo) application built on Avalanche's Contract Chain (C-Chain), which is designed for smart contracts and is compatible with Ethereum Virtual Machines (EVM). The social platform has been drawing a significant increase in transactions on the Avalanche network.

According to DappRadar, the Stars Arena platform recorded over 248,000 transactions on Wednesday, a sharp rise from the 16,000 daily transactions seen in late September. The transaction volume on the Stars Arena platform has also skyrocketed, exceeding $2.1 million on Wednesday. The app is currently seeing more than 14,000 active wallets.

Much like the popular decentralized social network Friend.Tech, which was launched on Coinbase's L2 Base, users on Stars Arena link their X (previously Twitter) accounts to the platform. Once connected, users can trade profile tokens of other members but are required to link an AVAX address to their profiles to transfer funds from the platform. The platform takes a small cut of fees being paid to the platform itself and the users when they buy or sell “tickets” of other users using AVAX tokens.

Purchasing a user's ticket provides users with access to a private chat. Stars Arena also features a public feed, so users can follow others without having to pay large sums of money upfront.

Ever since its launch, Stars Arena has been gaining traction. However, according to a Dune report, Friend.tech continues to lead the social platform space, with $33.4 million in weekly volume and 7.25 million monthly transactions compared to Stars Arena's 691.8K monthly transactions and $6.4 million in weekly volume.

Data from DefiLlama also shows that the platform has exceeded $1 million in total value locked (TVL) from just about $33K on Sept. 27, though nowhere near Friend.tech, which commands some $44.27 million in TVL. Avalanche TVL, meanwhile, is still around $500 mln, far off of the $11.5 billion peak in Dec. 2021.

The popularity of Stars Arena led to social media influencers, including Onlyfans star Vannessa Sierra, announcing their Stars Arena membership and earnings on X.

Click here to learn all about buying Avalanche (AVAX). 

The Current State of Avalanche 

All this interest in Stars Arena is boosting the price of AVAX upwards by bringing tons of activity on the network. Since the social platform's launch on the network, transactions on Avalanche have gone up to hit 376,000 transactions this week. The last time Avalanche network activity hit this level was around late July.

These numbers would still be nowhere near the 2021 bull market peak as toward the end of 2021, the network was boasting an average daily transaction volume of $500 million.

Avalanche is not the only one with a growing activity, though, as even Trader Joe, a prominent DEX on the protocol, saw its trading volume increase by 24.14% in the past week, underlining the positive momentum in the ecosystem. 

In spite of all the activity, total transaction fees paid by users on the Avalanche C-Chain declined by 38.5% to $317.86K in the past 30 days, according to data from Token Terminal. Meanwhile, annualized revenue, which is the share of transaction fees burned, has dropped by 47% to $3.87 mln. Daily active users over the past 30 days have also fallen by 30% to 32.42K.

Despite all this, Avalanche's ecosystem has attracted new development this year. In the second quarter, it partnered with Alibaba Cloud to create a blockchain-based metaverse deployment platform called Cloudbase. Stablecoin issuer Circle also launched its Euro Coin stablecoin on the blockchain. Moreover, Google Cloud recently announced its support for Avalanche blockchains within its BigQuery analytics service.

Avalanche has also been demonstrating its commitment to the Web3 gaming segment through the Arcad3 program, created to facilitate rapid and easy onboarding of game developers onto the blockchain segment. Recently, the network confirmed that NEOWIZ, one of the largest gaming companies in South Korea, was part of Arcad3. 

Meanwhile, this week, Ava Labs released a new update, Firewood. The rollout of this “multi-year effort” will make blockchain data storage more efficient, but more specifically, it resolves the data management concern for expanding blockchains. The firm is open-sourcing the code for Firewood for refinement before its final implementation. 

Popular blockchains like Bitcoin and Ethereum use the Merkle Tree structure to organize data, which tends to be slow and inefficient as the blockchain grows. So, to make blockchain data storage and organization smoother, Ava Labs is building Firewood from scratch by picking out the flows in the Merkle Tree system and adding “enhancements” to it.

Instead of relying on generic tools like LevelDB or RocksDB, which have been a cause of “misalignment,” Ava Labs aims to make Firewood a replacement “for the LevelDB/RocksDB + Merkle Tree.” By helping users organize their data storage more “efficiently,” Ava Labs aims to allow high throughput storage without requiring constant data cleanup or compression. The update will be integrated into various parts of the Avalanche in the coming days.

Concluding Thought

AVAX is currently riding a wave of positive momentum and may see further upward price movement. However, multiple factors challenge this trend. The broader crypto market is grappling with negative macroeconomic influences, and AVAX faces its unique hurdle: its upcoming scheduled unlocking. Given that AVAX's 1-year emission is set at approximately 75 million—equivalent to around $700 million—there's an inherent selling pressure on the cryptocurrency.

Fueling Avalanche and AVAX's growth is Stars Arena, yet they aren't alone in this ascent. Other blockchains are experiencing an influx of social finance platforms. For instance, the Bitcoin network hosts Alpha, Solana boasts Friendzy, and Arbitrum is home to PostTech. However, given the current liquidity scarcity, such momentum might be short-lived.