Investment

3 key signals of the Chainlink LINK price metric LINK is gaining strength

Chain (LINK) has had a pretty rough month, falling by as much as 45% after recording a record high of $ 37 on February 20. While recent losses may look surprising compared to other altcoins, LINK has nevertheless managed to collect 640% more in the last nine months.

Therefore, there should be no reason to interpret a holding failure above $ 32 as a reversal of the trend. On-chain indicators, such as daily active addresses and transactions, along with an open interest in futures contracts, continue to show strength.

Price Chainlink to Binance, USDT. Source: TradingView

Chainlink was also in a very good position to benefit from the decentralized financing (DeFi) boom. Many price channels, which combine separate blockchains and decentralized exchanges, use their price seers to determine prices.

The project was active when Fees for the Ethereum network have risen sharply and quickly adapted to “off-chain reporting”, which replaced aggregation of data in the chain with a round consensus outside the chain. As previously reported by Cointelegraph“The aggregated data is then passed to the blockchain, where the smart contract verifies that the quorum of nodes has agreed to this version of the data.”

Despite strong growth in DeFi and healthy on-chain indicators, it is impressive that LINK’s price is trying to regain $ 30 support.

The data in the string shows the strength

The value of the transfer is a leading indicator on the chain that measures user activity because it counts all the coins moved daily. CoinMetrics analysis provides more accurate data by modifying this data to exclude mixers and transactions between the same entities.

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Chainlink daily adjusted transfer amount 7-day average. Source: CoinMetrics

Daily adjusted transfers are around USD 600 million, a 235% cumulative profit since the beginning of 2021. The current level is twice that of litecoin (LTC), a cryptocurrency with a 7% larger market capitalization, but the primary use case of the project decreases with the development of Layer 2 scaling solutions.

Daily active addresses are another important metric in the chain, although they inflate easily when conversion costs are relatively low. Given that Chainlink runs on the Ethereum network, it certainly couldn’t be.

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Chainlink daily active addresses 7-day average. Source: CoinMetrics

As the above data shows, despite the recent decline, Chainlink’s daily active addresses have remained above 10,000. One should take into account rising fees for the Ethereum network, which could explain the inability to produce new highs. Nevertheless, the 14% gain of the indicator in 2021 can be considered positive.

Demand for futures contracts was strong

If top traders gave up Chainlink or somehow lost interest, the open interest in futures contracts would be affected. Although this metric does not necessarily determine a bullish rise, a healthy amount of derivative activity suggests that investors are interested.

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Chainlink futures open interest. Source: Coinalyze.net

The above data show no evidence of a reduction in open interest in futures contracts. The sharp decline on February 21 and February 22 reflects the 41% price drop that occurred. Meanwhile, less than a week later, LINK regained its support level of $ 26 and its open interest in futures continued to grow.

If the current upward market conditions persist, investors may begin to speculate that the “altcoin season is at hand. Chainlink currently appears to be in a good position to benefit from the peak of interest in DeFi.

The views and opinions expressed herein are those of an opinion author and does not necessarily reflect the views of the Cointelegraph. Every investment and business move involves risk. You should do your own research when making your decision.


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