Markets

Chainlink (LINK) price is defending the critical support at $6.8

Chainlink (LINK) price has been declining since it reached its 2023 peak of $8.7 on April 18. A deep dive into on-chain fundamental data shows that the downtrend can continue. Can LINK stay above $6?

Chainlink (LINK) is a blockchain network with a decentralized abstraction layer for integrating off-chain data into smart contracts. Since approaching $9 on April 18, LINK price has been on a losing streak.

The on-chain data analysis below shows some of the reasons behind the downtrend and possible price action for the coming weeks.

Whale investors are selling

The current downward price trend for Chainlink (LINK) can be attributed to the selling action of large investors on the network, according to on-chain data from Santiment.

A group of crypto whales holding 100,000 to 1 million tokens started a selling spree before the LINK price peaked on April 17. The chart below shows how they sold four million tokens between April 16th and May 2nd.

Chainlink (link) Pricing for whale wallet balances. May 2023. Source: Emotion

At current market value, the tokens they dumped are worth $27 million. Whale investors have enormous financial power and influence in the crypto ecosystem.

And when they start selling a large number of tokens over a short period, it sends a bearish signal to existing and potential investors.

Moreover, historical data shows that this group of whales has a knack for timing trades accurately. If this pattern repeats, LINK holders can expect more price volatility in the coming days.

Chainlink incentivizes network participants by an offer BUIDL supported services, rewards and exclusive product offers for contractors. However, in recent weeks, many users have removed their LINK tokens from DeFi protocols.

The Glassnode chart below shows that the supply of LINK in smart contracts decreased by 243,036 LINK (0.047% of the total supply in circulation) between April 22nd and May 2nd.

Chainlink (LINK) Price vs Supply in Smart Contracts.  May 2023.
Chainlink (LINK) Price vs Supply in Smart Contracts. May 2023. Source: glass

Supply in smart contracts tracks the percentage of the total circulating supply of a token that has been secured by its holders via various DeFi protocols. When it decreases, it indicates an increase in the supply of tokens available for trading on the exchanges.

The 243,036 recently opened LINK tokens are worth around $1.7 million. This could add significant downward pressure to the Chainlink price if it is put on the market.

Looking closely at the global in/out of the money price data on the price, it seems likely that the Chainlink price will drop below $6. But first, bears will have to face potential bullish support from 33,000 wallets containing 292M around the $6.6 price level.

However, if the bearish outlook goes as expected, LINK price may continue to decline until it reaches another important support level at $5.62. The next group of 71,000 investors who own 275 million tokens can establish themselves here.

Chainlink (LINK) GIOM price distribution data.  April 2023.
Chainlink (LINK) GIOM price distribution data. April 2023, source: IntoTheBlock

However, if the bulls can push the LINK price above $7, they can invalidate this bearish notion. But first they will have to overcome potential selling pressure from 44,000 addresses containing 147 million tokens.

If they can successfully break this resistance, LINK holders can expect the price to rally towards the $8 region again.

Disclaimer

In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *