Chainlink ($LINK) Experiences Major Price Correction: Is a Rebound on the Horizon?

Over the last month, Chainlink’s (LINK) price has declined sharply—by almost 40%—leaving traders and investors to wonder if the asset has any chance of recovering in the near future.

Or if it’s just going to keep on sinking. The recent downturn has raised concerns not just about Chainlink’s price, but also about its network activity—because, really, if a network’s token price is continually going down, what’s that say about the real price prospects of the network itself?

The recent price drop in $LINK has been correlated with a network contraction, indicative of a possible slowdown in activity across the Chainlink ecosystem. This change in momentum has attracted attention, with numbers showing that Chainlink’s market cap has also been trending downward. The price and activity are down, even as many other cryptocurrencies are seeing — or have seen — fluctuations, with some assets more volatile than others. Can Chainlink recover from this downturn?

Signs of Selling Exhaustion and Whale Activity

An essential metric that can shed light on Chainlink’s future trajectory is the MVRV ratio, which measures the profitability of traders who have purchased an asset. At present, Chainlink’s MVRV ratio shows that those who bought LINK in the past 30 days are sitting on an average loss of about 16%. This figure stands out because it represents a level that has historically been associated with “selling exhaustion points.” In layman’s terms, when the average trader is down 16% on something they bought recently, it often means a reversal is in the offing because the trader base clearly isn’t willing to sell at a significant loss.

The MVRV ratio indicates that selling pressure could be easing, but what has really caught the eye of market watchers is the latest whale activity. Over the past 24 hours, large investors—or whales—have shown confidence in Chainlink by buying up more than $20 million worth of LINK tokens. This buying by large investors is usually a reliable bullish signal, as whales tend to understand the market’s cyclical nature and make moves when they see clear opportunities. Why are the large investors piling in now? It could be that they’re positioning themselves for what they suspect might be the next big Chainlink price surge.

Even with growing interest from whale investors, Chainlink’s price still needs to show distinct signs of recovery before it can be called a rebound. For that to happen, Link must clear the important resistance level at $19 on its way to a target of around $23.70. This rebound has the potential to set up a trading opportunity as long as Link respects $19 as support on any subsequent retest.

The road to recovery does not come risk-free. Chainlink also has a support level that is absolutely critical at $15.50, and losing this level could completely derail any optimistic outlook for LINK. Falling below this key level, however, could generate a domino effect. The next number of traders and investors triggering sell orders could drive the price down toward the next support at a much lower level, and that is certainly something no one wants to see. If the support at $15.50 is going to hold, then we will see Chainlink price action above this level and breaking through resistance at approximately $19.

A Path Forward for Chainlink

Although Chainlink has many backers who have faith in its long-term potential, the price of LINK (the token used to pay for services on the protocol) has been correcting downward. At a market capitalization of $570 million, Chainlink ranks as the eighth most valuable cryptocurrency. Its market cap places it just above at $572 million and just below Dash at $317 million. The price of Chainlink has been ascending upward since April 1, 2019, but is now correcting. At the time of this writing, on August 5, 2019, the price of one Chainlink (LINK) is $0.525243.

In the short term, the big question is whether Chainlink can find its footing again after such a sharp drop in price. Whales have been quite active recently, and they have the potential to completely exhaust selling in Chainlink and allow the price to possibly start rebounding. Still, the cryptocurrency markets are very unstable, and the price of Chainlink may face quite a bit more downward pressure before it can be said with confidence that the price is in a rally that will last. Investors will need to be right on top of things to really have a clear sense of what is about to happen when it comes to price.

In the end, the coming weeks will probably be very important for Chainlink. If it can maintain important support levels, especially near $15.50, and push through the $19 barrier, there might be a prospect for a turnaround. Still, if the value presses on toward lower levels, we could find ourselves staring down the potential for a serious continuation of lower prices. As always, traders and investors should proceed with a healthy amount of caution and keep a close eye on market conditions.

Conclusion

Chainlink’s recent price drop of nearly 40% has raised questions about its near-term future. Yet, two factors—the signs of selling exhaustion and increased accumulation by whales—point to the potential for a rebound. The MVRV ratio suggests that the market is reaching a tipping point, while whale accumulation suggests that big players see value at these price levels. In this environment, it’s up to Chainlink to break key resistance levels and maintain critical support to confirm the potential for a rebound. Otherwise, we might see it drift lower in the near term. Traders and investors need to watch key price levels for the next signal.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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