Former high-flying crypto Avalanche (AVAX 0.90%) continues to crash to new lows. Now trading at a price under $10, Avalanche is down almost 20% for the year and 94% below its all-time high from just two years ago. 

While the near-term outlook for Avalanche may not be much to get excited about, is there a case for Avalanche as a long-term value play? There are two key factors that would seem to suggest that Avalanche is extremely undervalued heading into the final quarter of 2023.

Partnerships with high-profile tech players

Yes, overall user growth and transaction activity on the Avalanche blockchain appears to be in decline. And, yes, just about every key metric is well below previous highs. For example, take total value locked (TVL), which is a key indicator of overall strength in decentralized finance. Two years ago, TVL for Avalanche stood at $11 billion; today, it stands at a paltry $500 million.

That being said, Avalanche continues to line up partnerships with high-profile tech players. In January, Avalanche linked up with Amazon Web Services (AWS), the cloud-computing unit of Amazon (AMZN 6.83%). And in May, Avalanche announced a partnership with Alibaba Cloud, the cloud-computing unit of Chinese tech giant Alibaba Group. The strategy seems to be both simple and powerful: Sell large enterprise and government clients blockchain-based services that can run on the powerful Avalanche blockchain.

What remains somewhat of a mystery is why these tech partnerships have not driven value creation for Avalanche. Is it that clients and customers aren't buying what Avalanche is offering, and the market is pricing this in? Or are market participants ignoring what's right in front of them for Avalanche -- a sure-fire path to growth powered by two of the biggest tech giants on the planet?

Asset tokenization trend

Moreover, Avalanche is ahead of the curve on an important trend in the crypto and blockchain space: asset tokenization. That might sound like a mouthful, but all it means is the transformation of real-world assets (such as stocks and bonds) into digital assets that can be managed and traded on a blockchain. Once these assets are in digital form, a number of efficiencies emerge related to scalability, liquidity, and fractionalization. 

This is a concept that Avalanche has embraced. At the end of 2022, Avalanche completed a massive asset-tokenization project for private equity giant KKR & Co. (KKR -0.86%). Essentially, Avalanche "tokenized" a portion of a multibillion-dollar private equity fund, such that stakes in that fund could be managed and traded as tokens on the Avalanche blockchain.

In its letter to shareholders earlier this year, BlackRock (BLK -1.48%), the largest asset manager in the world, specifically pointed to asset tokenization as one of the most important trends it was currently tracking. Then, over the summer, Bank of America (BAC -3.64%) released a research report on asset tokenization, suggesting it could be a huge new market opportunity.

So here's the investment case for Avalanche: If it can get ahead of this major trend and secure even a small piece of upcoming asset-tokenization projects from the biggest players on Wall Street, this should be a growth opportunity that keeps on giving. According to consulting firm Boston Consulting Group (BCG), for example, asset tokenization could be a $16 trillion market opportunity by 2030.

Can Avalanche pull it off?

Remember, just two years ago, Avalanche was being highlighted as a potential "Ethereum (ETH -0.11%) killer" thanks to its fast speeds, low costs, and lightning-quick transaction finality. In terms of pure performance, it is still an elite Layer 1 blockchain worthy of being in the same conversation as Ethereum. Moreover, Avalanche has largely steered clear of any major regulatory issues, unlike direct competitors such as Solana (SOL 0.30%). 

Avalanche is a risky investment, but it could be a crypto that pops with the next big rally. There are two major factors -- the partnerships with big tech players and the asset-tokenization trend -- that are top of mind for me right now. Taking a long-term view, these are two potential catalysts for driving value. For that reason, I remain long-term bullish on Avalanche. At its current price, Avalanche has become just too undervalued to ignore.