Key Takeaways

  • Chainlink took a 36% nosedive after surging to an all-time high of $20.
  • Although prices have been able to recover partially, multiple on-chain metrics spell trouble.
  • Breaking through the $14.4 support level could see LINK fall towards $11.

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Chainlink has been consolidating within a narrow trading range over the past week. Although different technical indexes call for a rebound towards recent all-time highs, multiple on-chain metrics suggest a continued downtrend is still on the cards.

More Lackluster Price Action Ahead for Chainlink

Chainlink went through a significant correction after surging more than 157% throughout the first half of August. The bearish impulse saw the decentralized oracles token plunge by nearly 36%.

LINK went from trading at an all-time high of $20 to a low of $12.8.

While prices have recovered partially since then, it was not until recently that the TD sequential indicator presented a buy signal on this cryptocurrency’s daily chart. The bullish formation developed as a red nine candlestick that transitioned into a green one candle due to the upward price action.

This technical index estimates a one to four daily candlesticks upswing.

LINK/USD on TradingView

Nonetheless, IntoTheBlock’s “In/Out of the Money Around Price” (IOMAP) model suggests that Chainlink is poised to consolidate for an extended period.

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This fundamental metric reveals there is a critical resistance level ahead of the cross-chain data oracles token that could hold surging prices at bay. Based on the IOMAP cohorts, roughly 6,000 addresses had previously purchased more than 21 million LINK between $15.8 and $16.2.

Such a massive supply barrier may have the ability to absorb some of the buying pressure. If prices advance to this level, holders who have been underwater will try to break even on their positions, preventing prices from climbing further.

In/Out of the Money Around Price by IntoTheBlock
In/Out of the Money Around Price by IntoTheBlock

On the flip side, the IOMAP shows that Chainlink sits on top of stable support.

Nearly 15,400 addresses are holding over 21.3 million LINK between $14.4 and $15.3. This crucial area of interest indicates that bears will struggle to push prices further down.

Thus, the next significant price movement will depend on whether the bulls or the bears will give up first.

On-Chain Metrics Turn Bearish

Regardless of the ambiguous outlook that the IOMAP presents, other on-chain metrics are currently leaning bearish. For instance, data from Glassnode indicates that the number of new daily addresses being created on the network has been declining since mid-August.

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This downward trend in network growth can be considered a negative signal. Based on historical data, network growth is regarded as a leading price indicator. Indeed, a decrease in user adoption over time can help observers understand the health and well being of a cryptocurrency network.

Usually, a prolonged decline in network growth leads to a price slump. The lack of newly-created addresses tends to affect the regular inflow and outflow of tokens in the network.

Chainlink's New Daily Addresses by Glassnode
Chainlink’s New Daily Addresses by Glassnode

Moreover, Chainlink’s on-chain and social volume has been steadily declining since mid-August as well.

According to data analytics firm Santiment, these fundamental metrics help determine whether a coin is prepared for a further advance.

Santiment maintains that when these two indexes drop in unison, combined with a decline in daily active addresses, they form a reliable sign for future downward price action.

Chainlink's On-Chain Activity by Santiment
Chainlink’s On-Chain Activity by Santiment

Given the significance of the bearish signals previously mentioned, investors must pay close attention to the $14.4 support level.

Slicing through this price hurdle could be catastrophic for Chainlink since the next important area of interest sits between $12 and $11. While many could argue that this altcoin is in price discovery mode, the odds seem to favor the bears.

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