The price of Avalanche (AVAX) has plummeted by 10% in the last seven days. This sharp drop from $29.55 to $26.19 mirrors a wider sell-off amid market uncertainty.

As a result of this price action, traders are changing their tune after briefly holding bullish positions on July 27. This on-chain analysis spells out the sentiment the broader market is showing toward AVAX.

Avalanche Stumbles on a Shift in Sentiment

According to Santiment, Avalanche notes a violent, harsh switch regarding the Funding Rate. This rate is the cost of hodling an open perpetual contract in the market. If it is positive, the perp price of a cryptocurrency is trading meaningfully above the spot price, and the broader trader bias is bullish.

However, negative funding points to a bearish bias as the shorts pay longs a fee while the contract value is at a discount. 

At press time, AVAX’s Funding Rate is -0.017%, indicating that most positions in the market are shorts — that is, contracts leaned toward a price decrease.

Read More: What Is Avalanche (AVAX)?

The high negative funding, alongside the price decrease, indicated that traders were getting rewards for their positions. The reasonable inference is also that sellers in the spot market are aggressive, which could remain bearish for the price.

Another indicator that supports this thesis is Avalanche’s Addresses by Time Held. This indicator provides insights into the length at which cryptocurrency holders cling to the token.

If the number decreases, then it means holders are selling off their tokens or rebalancing their portfolio in favor of other cryptos. But if it increases, it indicates rising demand for the crypto involved.

For AVAX, the image below shows that only market participants who have held the token for over 365 days have refrained from selling. 

Those who accumulated AVAX between the last 30 days and the last 12 months have been liquidating, suggesting skepticism about its short-term potential. If this continues, the AVAX price may find it challenging to recover.

AVAX Price Prediction: Potential Drop to $25?

The daily AVAX/USD chart shows that the token could be set to close the month on a bearish note. The decline could be attributed to the rounding top pattern, which appeared between July 17 and 27.

A rounding top appears when the price of a cryptocurrency goes on a prolonged uptrend after a correction phase. Later on, the price goes back to the position it kicked off the upswing (the neckline). This technical pattern is usually bearish and is one of the reasons AVAX’s price nosedived.

Furthermore, AVAX’s correction may not be over, as the Relative Strength Index (RSI) shows that it is still in bearish territory. The RSI measures momentum, and readings below 50.00 indicate that the dominance is bearish, as it is with AVAX.

Read More: Avalanche (AVAX) Price Prediction 2024/2025/2030

If bulls fail to emerge, the token’s price could drop to $25.54. However, if the RSI reading reaches 30.00 or below, AVAX may become oversold. If that happens, a rebound may occur, and the price could attempt to retest $27.75.