As a seasoned crypto investor with over a decade of market experience under my belt, I have seen more than a fair share of bull and bear markets. The current situation with Chainlink (LINK) is one that gives me pause for concern. The recent price rejection at $12.50, coupled with the bearish on-chain metrics, suggests that LINK could be in for a 48% drop if market conditions do not change.
Currently, Chainlink’s price is in a potentially dangerous situation because it failed to move beyond the $12.50 mark. If current market trends persist, there’s a possibility that LINK could decrease by around 48%. This pessimistic outlook is based on a bearish reversal pattern that has emerged over several months in Chainlink’s price action. On-chain data suggests a significant drop for the oracle service provider unless broader market conditions improve. In the last 24 hours, LINK has decreased by about 2%, currently trading at $11.18.
Chainlink Price Hints Drop on Risks of Overvaluation
According to Santiment’s data analysis, the Chainlink Network Value to Transactions (NVT) ratio reached a peak not seen in three years on August 29. A high NVT ratio implies that the market value of LINK is relatively greater than the transaction activity on its network, potentially indicating that the asset might be overvalued.
Furthermore, the disparity between Chainlink’s Price and Daily Active Addresses (DAA) reached a one-month minimum of -59%, suggesting a trend where the price is moving contrary to the activity on daily addresses.
As the price of LINK increased significantly from August’s start, there was only minor growth in the count of distinct wallets engaging with the cryptocurrency, implying a decline in market confidence and decreased curiosity towards the asset.
Over the last seven days, the daily profit ratio of LINK has been decreasing and now stands at approximately 66%. This implies that for every 3 LINK transactions resulting in a loss, only 2 are successful in generating a profit. Consequently, due to this ratio being less than 1, there is currently a net loss occurring.
This suggests a bearish trend due to decreasing profits, as this may diminish investor trust and possibly prompt them to liquidate their assets. Subsequently, this could pressure the price of Chainlink to decrease.
Despite some reservations, investor confidence towards Chainlink is generally upbeat due to its successful completion of significant collaborations, most recently with Sony’s new blockchain platform, Soneium.
LINK Price Analysis: All Eyes On $6
An in-depth examination of Chainlink’s price trends on the graphs aligns with the findings from on-chain analysis. The daily LINK graph shows a large, multi-month head-and-shoulders formation that broke through the neckline around early August, but has since been retested and rejected.
This is worrisome for LINK investors because:
- A head and shoulders pattern signals a reversal from a bullish to a bearish trend.
Given that the price has broken below the neckline, retested, and got rejected, LINK price is likely to fall to $3.66, and with a little cushioning, $6.
Unless the market changes, the prevailing Chainlink price prediction is bearish.
If the price of LINK increases significantly and remains higher than its neckline, this could indicate a strong market and make Chainlink appear bullish. The price of LINK might reach $14 and $18, encountering the next significant resistance points.
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2024-08-29 15:02