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Chainlink (LINK) Supply Becomes Profitable Whilst Price is Still Under Pressure

Chainlink (LINK) saw a notable surge in value amid the excitement surrounding Bitcoin’s halving event, outpacing Bitcoin with a 20% price spike. Despite this rally, LINK now confronts a critical resistance level that has proven challenging to break through historically.

The recent uptick in Chainlink’s price has returned many investors to profitability, which could lead to selling pressure. As prices climbed, the portion of the total LINK supply that was in profit increased from 70% to 84% before slipping back to 70% following a minor correction. 

We take a look at LINK’s current price behaviour and evaluate Chainlink’s foundation and market exposure. 

Potential for Chainlink Investors to Sell

This 14% swing equates to roughly 82.18 million LINK, valued at about $1.3 billion. This fluctuation has brought the profitable supply back to levels seen before the recent downturn. Over the past two days, the share of profitable supply increased by 13%, reaching 84% at the time of writing.

While this rise in profitability is generally positive, it may prompt investors to sell and lock in their gains, especially if they’re concerned about further price drops. This selling activity could push Chainlink’s price down.

This sentiment is reflected in the Market Value to Realized Value (MVRV) ratio, a metric that measures the gains or losses of investors. Chainlink’s 7-day MVRV is around 11%, indicating a profitable position that could lead to selling. Historically, when the MVRV ratio ranges from 8% to 15%, LINK tends to correct, signaling a potential risk zone for investors.

Navigating Resistance: LINK Price Outlook

Following its 20% surge over the weekend, Chainlink reached a trading price of $15.8 on Gate.io, yet faced resistance at $15.6. This barrier has repeatedly challenged LINK in the past, often resulting in retracements. If LINK fails to sustain momentum above this level, it may revisit support levels at $14.6 or even $13.4.

However, should LINK manage to break through the $15.6 resistance and turn it into support, there is a chance for further recovery and price growth. The coming days will be incremental in determining whether Chainlink can follow price prediction models and maintain its upward trajectory or face additional selling pressure.

Chainlink explained

Chainlink (LINK) is a decentralized oracle network that plays a crucial role in connecting blockchain technology with real-world data and systems. In simple terms, Chainlink acts as a bridge between smart contracts on a blockchain and external data sources, enabling these contracts to interact with information from outside their native network. This capability is essential for a wide range of blockchain applications, allowing smart contracts to be more versatile and applicable in various real-world scenarios.

Smart contracts are self-executing contracts with the terms directly written into code. However, their limitation is that they generally operate within the confines of their blockchain, unable to access external data. This is where Chainlink comes in. It provides a secure and decentralized method for smart contracts to obtain off-chain data like market prices, weather conditions, sports scores, and more. This data is then used to trigger actions within the smart contracts, allowing for more complex and meaningful use cases.

How Chainlink Is Used

Chainlink’s decentralized oracle network ensures that the data fed into smart contracts is accurate, secure, and tamper-resistant. It does this by using a network of independent node operators that retrieve, validate, and deliver data to smart contracts. This decentralized approach ensures no single point of failure and reduces the risk of manipulation or inaccuracy in the data.

The tech stack’s use cases are extensive. In decentralized finance (DeFi), Chainlink is used to fetch real-time price feeds for various assets, enabling protocols to offer services like lending, borrowing, and trading with accurate market data. In insurance, Chainlink can bring in weather data to process insurance claims based on weather events. Supply chain applications use Chainlink to track goods and verify their authenticity. These examples demonstrate Chainlink’s versatility in expanding the potential of blockchain technology by allowing smart contracts to interact with a broader array of external data.

Chainlink’s widespread adoption in the blockchain ecosystem underscores its importance. As more applications and services on blockchain require reliable connections to external data, Chainlink continues to play a pivotal role in ensuring this connection is secure, decentralized, and scalable.

LINK vs Competition

Whilst Chainlink (LINK) is a leading player in the decentralized oracle space, it’s not without competition. Several other oracle networks aim to provide similar services, bridging smart contracts with off-chain data sources. Notable competitors include Band Protocol, API3, and DIA, each with unique approaches to decentralization, security, and data sourcing. 

Band Protocol uses a cross-chain approach, allowing data feeds to interact with multiple blockchains, while API3 focuses on decentralized APIs managed by DAO-governed oracles. DIA, on the other hand, specializes in transparent data sourcing, particularly for financial applications. These competitors challenge Chainlink by offering varied solutions, emphasizing aspects like cross-chain compatibility, governance, and data transparency.

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