With Bitcoin leading the market gains, with a weekly price increase of nearly 16.90 percent, the rest of the market has remained relatively calm. While the market appears to be steadily rising on the back of Bitcoin gains, most alts have failed to surprise the market. Chainlink, the 15th most valuable altcoin by market cap, has also seen relatively flat price action.
However, while the alt’s long-term prospects appeared promising, market confidence in the alt appeared to be lacking, so where could LINK go from here?
A classic example of difficulty and frustration
Chainlink was one of the top five crypto-assets in the fourth quarter of 2020. With Defi exploding, many altcoins took off, but LINK’s rise was small in comparison to the market. Now that the alt has dropped nearly ten ranks and is ranked 15th in terms of importance and pecking order, the asset appears to be well out of investors’ sights.
On a daily chart, LINK’s market appeared to be stagnant in terms of cash inflows, with its Relative Strength Index maintaining a horizontal trend for nearly a week. This type of constant trajectory was indicative of a lack of cash inflows and market confusion about LINK’s price. LINK’s price appeared to be in a cloud, presenting a classic case of frustration and difficulty for traders.
The potential for growth remains.
On the weekly chart, LINK was nearing a bottom, and it was notable that, while the downside risk is limited, the alt’s upside potential appears to be strong. Nelson Paul, an analyst, added that betting on LINK in the coming months could be a good strategy because ‘the alt can target three-digit price.’
Notably, aside from announcements of collaboration with other blockchain projects, LINK has played a critical role in the Defi as well as the NFT space owing to its oracles. Chainlink oracles provide real-time data to smart contracts, making it easier to trade these NFTs.
Spartan Hill, a fintech firm, recently announced that it will use Chainlink Price Feeds to power a new decentralized Colombian Peso stablecoin called Daily (DLY).While these development-focused updates haven’t had much of an impact on LINK’s price, metrics have painted a bullish picture for the altcoin.
So, is this a good starting point?
Notably, at the time of writing, LINK’s NVT was at an ATH. This high level was last seen in July 2020. This could indicate that the network valuation was greater than the value being transmitted. It may occur when the network is experiencing rapid growth and investors regard it as a high-return investment. On the other hand, its active addresses were approaching all-time lows, which was concerning.
However, a decrease in the Herfindahl Index, indicating that funds are becoming more evenly distributed across addresses, was a positive sign for the network. Furthermore, MVRV (7-day) for the asset had bottomed, indicating a reversal that could benefit the alt.
Even though it was negative, LINK’s short-term ROI was only -0.89 percent, which was not too bad, while its three-month and one-year ROI were +47.91 percent and +181.69 percent, respectively. As a result, with LINK’s prices remaining stagnant and the alt showing upside potential, levels below $28 appear to be a good entry point into the market.