Chainlink has seen an impressive 27% price increase since the beginning of September, making it one of the top-performing assets in the top 10. This trend stands out, especially when considering the overall market cap, which has retraced to its September 1 levels.
Around September 19, when the market reached its monthly peak at $1.065 trillion and then dipped by 4.64% to $1.016 trillion as of September 25, LINK showed resilience. While the overall market saw a decline on September 11, LINK retraced only to its September 1 starting point of $5.70.
With the current price at $7.30 and an upward trajectory, the question remains: will LINK continue to rise, or is it poised for a potential downturn?
LINK has been in a bear market since reaching its all-time high of $52.8 on May 10, 2021. Initially, it experienced a steep 75% drop to $13.4 by July 21, followed by a noteworthy rebound to $38 on November 11 of the same year.
Subsequently, another downtrend began, leading to a drop to the $5.30 range in May and June of 2022, marking the lowest point in this bear cycle and an overall decline of 90% from the all-time high.
Following this decline, the price entered a sideways movement, creating a range between $5.30 as support and $9.20 as resistance. This range has persisted for 502 days, starting from the initial drop to $5.30 on May 12, 2022, up to the present date.
One interpretation of this range is that it represents a consolidation zone, establishing a higher plateau in the macro context compared to the period from June 28, 2019, to July 4, 2020.
Examining the trading volume, we notice a recurring pattern – a U-shaped formation that is currently in its second phase and gaining momentum.
On July 14 this year, the price broke out of a descending structure stemming from its August peak last year. Despite a dip inside it during August, the price has now reclaimed its position above it.
Notably, in late August of this year, the price established its first higher low at $5.80, compared to its previous low of $5 on June 10. Is this early indicator signaling the start of a potential bull cycle?
In a recent post on X, Santiment pointed out that Chainlink’s upward movement often coincides with an influx of LINK tokens into exchanges.
We did observe a surge in inflow activity on September 14, peaking at $16 million the following day. However, it quickly reverted to its typical median levels of around $220,000 after the spike.
However, since the uptrend began on September 12, it’s clear that this isn’t the root cause of the spike. Instead, we can speculate that the spike may be related to a deposit of LINK tokens, possibly with the intention to sell them at the peak of the uptrend.
A logical correlation to consider is the rise in outflow activity, indicating that investors have been withdrawing tokens into their cold wallets, accumulating them for the future. After September 15, we witnessed a decline in inflow activity and a corresponding increase in outflow activity.
As a result, the Netflow turned negative, reaching -$1.38 million on September 20, suggesting that investors may have been accumulating the token as the uptrend continued.
Analyzing the concentration charts alongside the inflow/outflow data, we can discern a shift in ownership. Over the past 30 days, the number of whales (defined as addresses holding over 1% of the supply) has decreased by 1.79%, whereas the number of retail investors (holding less than 0.1% of the supply) has risen by 3.65%.
Since LINK’s price began its ascent on June 10, breaking above the descending trendline, it may have marked the initial five-wave impulse of a broader uptrend. Starting from July 20, it reached $8.3, followed by a downward movement within the descending formation, resembling a three-wave pattern.
This pattern could potentially represent an ABC correction and the second sub-wave within a larger five-wave impulse of higher significance.
If this plays out, the increase we’ve seen since late August could be the third part of the upward movement, aiming to break above the $9.20 resistance. If successful, the next target would be approximately $11.5, which aligns with the 1.618 Fibonacci extension level.
Assuming this is wave 3, wave 4 would subsequently retest the horizontal resistance as support, followed by wave 5 making another higher high, thereby confirming the inception of a bull cycle.
However, if the price takes another downturn from current levels and falls below $5.80, this possibility would be invalidated, and we’d need to consider the potential for a downside breakout below $5.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.