Avalanche’s Supply Inflation and Its Impact on Investments
Understanding the tokenomics of cryptocurrencies is essential for gaining an edge in the market, as supply inflation dynamics have a significant impact on investments. One cryptocurrency that has relevant supply inflation is Avalanche (AVAX), and we’ll examine it from a different perspective.
By studying leading indexes and using demand as the benchmark (illustrated by capitalization), we were able to calculate the price at which AVAX would trade if it ever reaches its all-time high market cap.
Both supply and demand play a role in determining whether a cryptocurrency’s price will rise or fall. An inflationary asset requires proportionally more demand to maintain its value.
Avalanche’s All-Time High Price and Market Cap
In November 2021, AVAX reached an all-time high price of $146.22 per token. The following day, Avalanche achieved its highest market cap of $33.81 billion, with approximately 231.226 million AVAX in circulation.
Avalanche’s Supply Inflation and Economic Effects
Now let’s delve into Avalanche’s native token supply inflation and its economic implications. Currently, there is a circulating supply of 365.772 million AVAX, resulting in a supply inflation of 134.546 million AVAX (58%) over two years, equivalent to an annual inflation rate of around 29%, which is higher than Solana’s yearly inflation.
The projected price also demonstrates the significant economic effects of this substantial inflation. If Avalanche reaches its previous speculative demands as an Ethereum competitor, AVAX would trade at a comparatively lower price than its all-time high.
Based on the circulating supply on December 19, the price of Avalanche would be $77.94 per token at its highest capitalization. This represents a decrease of $68.28 (46.7%) from its highest price in 2021 but still indicates a potential 90% increase from the current price of $41.00.
It’s important to note that this forecast relies on the same level of demand for Avalanche as in 2021, which is not guaranteed. Additionally, there is a possibility of higher demand in the future, which may be offset by the continuous supply inflation.
Hot Take: The Future of Avalanche’s Price
Considering Avalanche’s supply inflation and economic effects, it’s difficult to predict the exact future price of AVAX. While there is potential for a significant increase from the current price, it relies on maintaining the same level of demand as seen in 2021. However, market conditions can change rapidly, and it’s uncertain if that level of demand will be sustained. Investors should carefully evaluate these factors when considering their investment decisions in Avalanche and any other cryptocurrency.
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