Amid the general downturn in the global cryptocurrency market, Avalanche [AVAX] stood out as one of the top 20 cryptocurrencies by market capitalization, performing well.

Despite the broader market's decline, AVAX's performance has improved significantly, with assets up more than 6% over the past week. Despite the pullback over the past 24 hours, momentum remains positive, currently trading at around $28.82 at the time of writing.

On-chain technical indicators support an uptick!

Technical analysis suggests that AVAX could rise, but a deeper look at the asset’s fundamentals is needed to determine the likelihood of such a large price increase.

An important indicator to consider is the Relative Strength Index (RSI), which measures the momentum of an asset’s price movement.

The RSI fluctuates between 0 and 100, with readings above 70 indicating overbought conditions and below 30 indicating oversold conditions.

At press time, Avalanche’s RSI is 58, according to data from CryptoQuant.

This suggests that the asset is in a neutral state — neither overbought nor oversold — which gives it room to move up or down depending on broader market factors.

Apart from the RSI, another important metric is open interest, which measures the total number of open futures contracts for an asset, and AVAX’s open interest decreased by 2.33% to a value of $299.64 million.

However, this decline was offset by a significant 27% increase in AVAX open interest to $541.01 million.

This indicates growing participation in the AVAX derivatives market, a factor that could influence the asset’s price action in the near term.

Avalanche Foundation and Token Buyback Initiative

In addition to the traditional October bullishness, other key events could also trigger the projected price surge. Most recently, the Avalanche Foundation agreed to buy back all AVAX tokens sold to the Luna Foundation Guard (LFG) in April 2022.

As early as 2022, LFG held 1.97 million AVAX tokens, worth up to $60 million. It is worth noting that the Luna Foundation made this purchase to serve as a reserve asset in its treasury and to strengthen the strength of its UST stablecoin. Through recent efforts, the Avalanche Foundation is trying to avoid LFG default.

The pressure from the bankruptcy proceedings could cause the Luna Foundation to liquidate and sell off the AVAX tokens in its portfolio. The Avalanche Foundation hopes to avoid this by submitting a buyback offer for 1.97 million AVAX to the court. If it succeeds in buying back these assets, it could have a significant impact on the circulating supply of AVAX.

Shrinking the circulating supply of tokens could help AVAX prices maintain their bullish momentum. Meanwhile, the Avalanche Foundation is waiting for bankruptcy court approval for a proposed buyback of AVAX tokens.

What’s next for AVAX?

Currently, AVAX has broken out of a multi-month “falling wedge” pattern, which is a bullish technical signal in market analysis.

A falling wedge usually appears after a long downtrend, when prices consolidate and begin to form lower highs and lower lows, similar to a wedge. Once prices break above the upper trendline of this wedge, it usually signals the end of the bearish trend and the beginning of a new rally.

As AVAX breaks out of a falling wedge that has persisted for several months, a strong rally is expected in the next 3-6 months. Although somewhat ambitious, the price of AVAX could rise to $50, or even create new highs, depending on market conditions.

While these price targets are ambitious, they reflect growing optimism about Avalanche as the cryptocurrency market looks for signs of recovery.