The Avalanche blockchain platform'due south native asset, AVAX, fell on Aug. 19 as traders decided to secure their profits from its 100% upside motility.

The AVAX/USD exchange charge per unit plunged more than 16% after hitting a three-calendar month high of $36.64, putting the brakes on a seven-day upside boom that saw its toll ascent by 111%. It appears that traders felt uneasy virtually entering AVAX markets nigh $36 because of its historical reference as a sell-off level, capping AVAX'due south previous recovery attempts from March to May.

Overvaluation risks

AVAX also dropped on interim overvaluation fears. The daily relative strength index (RSI) of Avalanche's token crossed above lxx during its upside nail. Essentially, markets consider an RSI reading above 70 as overbought for the underlying asset, noting that the price has climbed excessively college and, therefore, should undergo a correction.

Avalanche (AVAX/USD) daily price nautical chart. Source: TradingView

More show for AVAX's acting overvaluation appeared when looking at the Bollinger Bands. The indicator consists of a middle band (a 20-period simple moving average) and ii outer bands set at two standard deviations below and above the middle ring.

When the price overreaches its valuation in the short term, information technology tends to leap above the upper band. Similarly, slipping below the lower ring suggests that the nugget is trading below its current valuation. AVAX crossed above the upper Bollinger Band post-obit the latest price rally.

The two indicators were instrumental in predicting recent AVAX price corrections. For example, during the February rally where AVAX surged over 500% in just two weeks, its RSI and Bollinger Bands both alerted t its excessive interim valuation.

AVAX momentum indicators alarm overbought risks. Source: TradingView

The price wiped off 65% of its gains in the adjacent 3 weeks to neutralize its overbought status. Its adjacent acting support came at the 23.6% Fibonacci line ($22.29) of the Fibonacci retracement graph fatigued between the $63.3 swing high and $9.62 swing low.

The same 23.6% Fibonacci level now serves as the next line of back up should the price of AVAX right following its RSI and Bollinger Bands alerts.

Fundamentals

The latest tour of AVAX'due south price boom appeared in the wake of the launch of its $180 meg "liquidity mining incentive plan" to bring decentralized finance (DeFi) services to its blockchain platform, including lending platform Aave and automated marketplace protocol Curve Finance.

Related: Avalanche Blitz to give out more 180M in DeFi incentives

AVAX'southward bounce also appeared as a rally in the marketplace of its elevation rival, Ether (ETH), flattened out. This is because traders tend to rotate capital letter out of overvalued markets to bet on assets they deem undervalued.

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