18 August 2020
After a temporary retraction, Chainlink has once again is the focus of the crypto world as its price continues to climb. Since its listing on Coinbase in May, it has benefited from a meteoric rise to $6B and the #5 in the largest cryptocurrencies by market cap – only behind Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), & Tether (USDT). Since the start of August, LINK’s price has increased by 120% while the last week saw nice 80% spike. It draws the question: How much higher can it climb and is growth already priced in?
In answering these questions, we should first look towards the explosive growth of decentralized finance (DeFi). As noted in our previous coverage of Chainlink, DeFi requires access to raw data that is only available on other websites or blockchains. Oracles have emerged as the lynchpin in this process. As DeFi continues to grow, the need for oracles expands in correlation.
Growing investor interest
Aside from the growth of DeFi, Chainlink has sparked investor interest with its growing collaboration with Google Cloud and the outlook for staking to offer investors a passive income stream on their idle cryptocurrency asset. The potential for staking is correlated with Ethereum, which LINK is built upon, as the crypto world eyes ETH 2.0 as a means of moving from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Technical Analysts Continue to Speculate
With Chainlink hitting a new all-time high with each bullish candle, predicting a peak value for the cryptocurrency has become more or less a guessing game for traders. The ‘daily’ chart of Chainlink/USD is shown below to explain this fact.
From 2nd August onwards, the wicks of each ‘daily’ candle demonstrate the tendency of Chainlink printing new ‘highs’ almost every 24 hours. It illustrates extreme bullishness and positive sentiment in the cryptocurrency. Subsequently, the volume has also risen in the past 10 days, which indicates an additional inflow of cash into the asset.
Concurrently, we should not forget that the moving averages of MACD are slowly heading towards the overbought zone. This is an indication that the uptrend is over-extended, and this can lead to a sharp reversal. Therefore, all technical indicators are hinting of an overbought environment for Chainlink. Last week, Weiss ratings shared their sentiment as a caution to investors and traders to be mindful that the continued rise could be coming to an end.
Chainlink and Bitcoin: A non-Correlated Duo
Bitcoin has been a guide to rest of the cryptocurrency market, as they have posted similar price movements to bitcoin recently. However, Chainlink is showing signs of deviation from this normal trend. As bitcoin is trying to consolidate, Chainlink is incurring new parabolic uptrends.
In the last couple of weeks, Chainlink’s correlation with BTC has been on the decline, coming off from a time when it was remarkably high. Historical data indicates decoupling just before fresh rally kickstarts. Analysts are poised for a run as Chainlink is manifesting signs of a gradual decoupling from Bitcoin. This breakaway is becoming more obvious as Chainlink is outshining bitcoin. If this connection continues, Chainlink will record a bullish continuation regardless of BTC, with a potential rally eminent.
Week Ahead for Bitcoin
Bitcoin would need to fall below the ‘support’ level of $11200 to suggest a short-term reversal in the cryptocurrency, which would also indicate that the resistance level of $12000 has come into play. The flattening of moving average of MACD suggests that a breakout from current levels cannot be ruled out. In the event of a breakout, the second major resistance would come in at $12,460, where again it could see a stall in the price or a consolidation.