Avax Coin: A Smart Investment Decision?

Avalanche (AVAX) is a leading Layer 1 network and the 12th largest cryptocurrency by market capitalization, seeking to rival Ethereum in smart contract functionality, scalability and transaction speed. AVAX is the native coin on the Avalanche platform, used for staking, paying transaction fees and voting on proposed changes to the network. In this article, we will explore the topic 'Is AVAX coin a good investment?' by looking at its price history, predictions for the future and its advantages over other cryptocurrencies.

AVAX coin price history

AVAX is the native coin on the Avalanche platform, which was launched in 2020 by Ava Labs, a company founded by Cornell University professor Emin Gün Sirer. AVAX first entered the open market in September 2020, with a value of around $5. In early 2021, the coin's price rose, and it peaked above $50 in February of that year. It then stabilised at around $30 before dropping during the summer and recovering in the autumn to reach an all-time high of $146.22 on 21 November 2021. It ended the year at $109.27.

However, 2022 proved to be a challenging year for AVAX, along with much of the rest of the crypto market. The coin experienced inconsistent performance, with a notable high of $103.53 on 2 April, followed by a series of market crashes that saw it fall to $13.79 on 19 June. It recovered somewhat towards the end of the year, trading above $20 on 5 November before dropping to $10.65 on 30 December due to the collapse of the FTX exchange. AVAX ended 2022 at $10.90, reflecting an annual loss of over 90%.

The year 2023 saw some recovery, with AVAX peaking at $22.71, its highest value since November 2021. However, the collapse of Silvergate bank caused the coin to slip again, reaching a low of $13.94 on 10 March. By 3 April 2023, AVAX had recovered to around $17.30, with a circulating supply of just under 32.6 million out of a total supply of 422,018,587. This gave it a market cap of approximately $5.6 billion, making it the 16th largest cryptocurrency by that metric.

Avalanche's scalability

Snow is the underlying family of consensus protocols in Avalanche, and it enables a highly scalable and secure consensus engine. This sets Avalanche apart from its competitors and allows it to power a global network of hundreds of millions of devices operating together at high speed.

The Snow protocol combines the properties of a classical consensus protocol and Nakamoto consensus. In the classical consensus protocol, there are low delays and high throughput, but scalability is an issue due to its reliance on "all-to-all communication" to reach consensus. On the other hand, the Nakamoto consensus mechanism, used by proof-of-work networks like Bitcoin, suffers from delays, low throughput and constant energy requirements.

The Snow protocol addresses these issues by having each node on the network poll a small, constant-sized, randomly chosen set of neighbouring nodes to achieve consensus, rather than using "all-to-all communication". This process of repeated random sampling of smaller subsamples allows the network to reach a unified consensus quickly and efficiently. It also reduces the energy consumption compared to other methods.

Avalanche's subnet feature is also worth mentioning. Subnets are dynamic sets of validators that work together to achieve consensus on the state of a set of blockchains. Validators can be members of multiple subnets, and each subnet can validate many blockchains. This reduces network traffic and increases customisability, further enhancing Avalanche's scalability.

Thanks to its scalability, Avalanche is able to offer lower gas fees and faster transactions than some of its potential rivals. This has led to increased adoption, with more than 380 projects built on the platform, according to Bank of America. Avalanche's total value locked has also seen significant growth, rising 6,255% since August.

AVAX's capped supply

AVAX, the native coin of the Avalanche platform, has a capped supply of 720 million coins. This fixed cap creates scarcity and sets it apart from other staking platforms that have unlimited supply and continuous dilution through inflation.

The total supply of 720 million AVAX tokens is divided into two halves: 360 million AVAX were minted at launch, and the remaining 360 million are used as staking rewards released over decades. This long-term release of tokens helps to gradually increase the scarcity of AVAX. Additionally, the reward rates for staking will decrease over time as it gets closer to the capped supply, similar to Bitcoin's halving mechanism but at a smoother rate.

The burning of AVAX tokens further contributes to the capped supply and increasing scarcity. All processing fees on the Avalanche network are burned, reducing the supply and increasing the scarcity of AVAX for token holders. This burning mechanism also applies to transaction fees, creation and minting of assets, smart contracts, and the creation of subnets and blockchains. The more activity on the network, the more AVAX tokens are burned, which can create deflationary pressures if the number burned exceeds the amount minted in staking rewards.

The capped supply of AVAX, combined with its utility in the consumer and enterprise spaces, makes it an attractive investment option. However, it's important to note that the cryptocurrency market is highly volatile, and investors should always do their own research before investing.

Avalanche's competition with Ethereum

Avalanche (AVAX) and Ethereum (ETH) are two of the most popular cryptocurrencies in the market today. Both platforms offer unique features and benefits, but there are some key differences that set them apart. Here, we will focus on Avalanche's competition with Ethereum.

Avalanche is a decentralised platform that enables developers to create and deploy decentralised applications (dApps). It was designed to address the scalability issues and high costs associated with Ethereum. Avalanche claims to be super-fast, cost-effective, and environmentally friendly. It focuses on three key aspects: speed, transaction cost, and sustainability. Avalanche aims to become a highly scalable blockchain network without compromising security or decentralisation.

One of the main differences between Avalanche and Ethereum is the consensus mechanism they use. Avalanche employs a unique consensus mechanism, the Avalanche protocol, which relies on a group of nodes or subnets to achieve consensus. This allows Avalanche to process up to 4,500 transactions per second (TPS), with the potential to handle millions. In contrast, Ethereum can currently handle only 15 TPS, but this is expected to improve with the ETH 2.0 update. The higher transaction speed and scalability make Avalanche a more attractive platform for building high-performance dApps.

Another difference lies in their tokenomics. Ethereum's native token, Ether (ETH), is one of the most well-known tokens and is listed on almost all crypto exchanges. It is used to pay validators, participate in ICOs, and as a store of value and a means of exchange. On the other hand, Avalanche's native token, AVAX, is used to pay for gas fees, stake for validation, and participate in governance decisions. AVAX offers seamless value transfer and is more affordable than ETH. Additionally, Avalanche has lower gas fees than Ethereum.

When it comes to DeFi and non-fungible tokens (NFTs), Ethereum has the upper hand due to its larger and more established ecosystem. Many new projects choose to launch on Ethereum because of its widespread adoption and the familiarity that developers have with the platform. However, Avalanche is not far behind in terms of DeFi functionality, offering features such as staking, lending, and farming.

In summary, Avalanche and Ethereum have their own strengths and weaknesses. Avalanche excels in transaction speed, scalability, and energy efficiency, while Ethereum has a more established reputation, a larger developer community, and battle-tested security. The choice between the two depends on specific needs and requirements. Developers seeking high-performance dApps with fast and efficient transactions may prefer Avalanche, while those prioritising security, reliability, and an established ecosystem may opt for Ethereum.

AVAX's 2025 price prediction

AVAX is the native coin on the Avalanche platform, which claims to be the fastest smart-contract platform in the blockchain industry. Avalanche aims to achieve high-transaction throughput and scalability via its native Snow protocol, which combines the properties of a classical consensus protocol and Nakamoto consensus.

The AVAX coin has had a volatile history since its launch in September 2020. It reached an all-time high of $146.22 in November 2021 but experienced a sharp decline in 2022, along with the broader crypto market.

Looking ahead to 2025, price predictions for AVAX vary. CoinPedia predicts that AVAX's price could reach a maximum of $134 by the end of 2025, with a potential low of $48 and an average price of $91. DigitalCoinPrice is more bullish, expecting the coin to trade at an average price of $60.55 in 2025. On the other hand, WalletInvestor predicts a bearish outlook, forecasting AVAX to fall to just $6.14 by August 2025.

It's important to remember that cryptocurrency markets are extremely volatile, and price predictions often turn out to be wrong. Therefore, it's crucial to do your own research and carefully consider your risk tolerance and investment goals before investing in cryptocurrencies like AVAX.

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