AltcoinsCryptocurrencyDecentralized Finance (DeFi)Price Analysis

Chainlink (LINK): Here’s Why Supply Shock Could Be Impending

Chainlink’s bearish mid-month actions have seen the alternative token surrendering gains acquired since the August start. The altcoin has dropped into the $6 – $8 range again after navigating the value areas in June-July.

Nevertheless, fascinating indications show that things could shift for LINK. The token’s exchange reserves declined by a significant market within the previous two months. It enjoyed a 6-month high at 108.9 million before slumping to 95.7M by August 25.

That means exchange reserves currently hover at a similar range to their prevailing 6-month lows. A massive price crash emerged the last time Chainlink’s exchange reserves plummeted to current regions. Can that trigger another similar plunge for the crypto?

Can Lightning Hit Same Spot Twice?

The two setups boast notable differences. For instance, LINK price has responded to exchange reserve in the present scenario. The past exchange reserve low saw price divergence. Meanwhile, the price hovered at a $10 discount by August 25. And there could be more room for further downside.

Chainlink’s exchange supply has seen declines within the previous four weeks. However, this had less effect on LINK price action due to different factors. Among the factors is the dip in network growth in that same timeframe.

The plunging network growth within the past 30 days is possibly among the facets contributing to Chainlink’s dampened investor sentiment. The slow network growth hasn’t stopped the Chainlink ecosystem from pursuing developments in the industry.

Chainlink maintained attractive development activity during the month’s first half. However, last week’s bearish market disrupted such tendencies. Developers presumed their efforts swiftly, considering the rapid upsurge in developer activity indexes.

A Robust LINK Required Here?

The absence of clear direction for LINK investors means they should cope with uncertainty. Nevertheless, the exchange reserve decline could also catalyze volatility resumption.

Shifts in exchange reserves will likely influence Chainlink’s demand. The lower exchange token amount, higher demand, and more outflows will ultimately catalyze supply shock.

Meanwhile, bears controlled the cryptocurrency market during this publication. The global cryptocurrency market capitalization remains weak at around $1 trillion. The metric could slide beneath this threshold in the coming hours or sessions.

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