In recent years, Chainlink’s $LINK token has seen some standout accumulation and distribution phases, particularly with its key holders.
We can observe these phases by paying attention to who’s holding and who’s not in order to gauge the sentiment of traders and investors in the broader crypto market.
While we’ve been in a bear market, the key holders of $LINK have been accumulating. They’ve been intensively dollar-cost averaging into their $LINK positions, not only in recent months but also in the months leading up to this prolonged downturn.
The Journey from $26 to Current Price Clusters
Chainlink’s price action has seen substantial shifts, most notably during late 2021, when $LINK traded around $26. During this period, addresses with a cost basis near that price held approximately 11 million $LINK tokens. However, as the market began to shift and the price fell to around $15, many of these holders initially chose to retain their exposure to the asset. This decision to hold on, despite a significant price drop, signaled strong conviction by these investors that $LINK’s price would eventually recover.
By December 2022, the situation had changed completely. The supply of $LINK at the $15 price level had dwindled, with only about 1 million tokens left to buy at that price. Meanwhile, the 1 million retail investors who had been announced to hold $LINK as of that summer still seemed to be in possession of their tokens. With the market price at $25 and the supply at that price point presumably in the hands of investors attempting to sell, it thus appeared as though a fresh cohort of long-term investors had taken on a new cost base around $25.
This year, $LINK entered a key accumulation zone around the $7 mark, and mid-2023 saw this area soak up an impressive 66 million tokens. Meanwhile, addresses that accumulated under a $7 cost basis have enjoyed a shift into a much higher range of price levels that has brought us back to contesting $10 for LINK. Price accumulation or appreciation in the latter half of 2023 may coincide with reduced interest in LINK at lower levels, as the addresses that originally absorbed 66 million tokens have taken up profits on pending sell orders. At what level might those who have seen no link in the past two years take profits? Probably at around the $10 level.
Reaccumulation and New Cost Basis Clusters
Come September 2024, the reaccumulation trend had resurfaced, forming cost basis clusters at higher valuations. Clearly, some steadfast market participants have been targeting $LINK at these prices, using the unpredictable price action as an opportunity to refresh their holdings. You’re now either accruing or being liquidated, with no real room for staying in the middle without having a better or worse cost basis than you did in crypto’s 2022022 to mid-2023 bear market.
The first cluster is at the ~$16 level, where about 16 million $LINK tokens are still held. This price zone is one to watch, as it may eventually turn into a point of resistance if prices can’t manage to break through. With so much supply concentrated here, it’s hard to tell if this is a significant barrier or if the market will absorb this supply and push to higher prices.
Around the $14.8 price level lies the second key supply cluster, where 53 million $LINK tokens are concentrated. This price area has proven, time and again, to be a significant support level for $LINK. Grafa’s most recent data shows that, despite a recent bullish trend for Bitcoin and subsequent price drops for altcoins (including LINK), the vast majority of token holders at this price cluster have not moved their tokens. Indeed, there’s no evidence of token holder mass distribution from the $14.8 support area. And in my view, that makes the $14.8 price level a critical one to watch.
Nevertheless, if the price declines beneath this support level, it may be a sign that there’s a transition afoot, from accumulation to distribution. That would mean the people who bought at these levels are starting to sell. If that were happening now, we’d expect to see some kind of mass distribution in the amount of $LINK being sold. The thing is, there’s no evidence that is happening.
Conclusion: Key Levels to Watch
Chainlink has been quite a performer in the current market conditions. Price action has been rather muted across the crypto space, with most coins trending in the same direction, either up or down. However, Link has managed to hold the line across key support and resistance levels. Notably, its performance in holding support around the $14.8 level has given it a good base from which to work. Its resistance level of around $16 allows it to still be bullish in the short term. It is key to note that the Link token is still in an upward channel for trading. The next major point of interest will be the area around $20. Can it punch through that level? If so, it will be a strong indicator that bullish conditions are still in effect for Link. If resistance turns back into support around that level, it’s a good buy zone. If it can’t maintain the upward channel and starts to fall, look for it to find support around $14.8. If it can’t hold that level, it’s in trouble.
The present support of Chainlink and its ability to burst through resistance or emerge from fresh volatility rests upon these supply clusters and their critical behavior. We’re not likely to find out in the next few days, however, since the outcome is more about what the supply clusters decide to do in the months ahead. And this outcome is in turn about what sorts of decisions and judgments the market as a whole decides to make. Or put a little differently, it’s about who (or what) decides to side with or against Chainlink.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
Follow us on Twitter @themerklehash to stay updated with the latest Crypto, NFT, AI, Cybersecurity, and Metaverse news!
Image Source: fellowneko/123RF // Image Effects by Colorcinch
