Chainlink (LINK) had a pretty tough month, falling as much as 45% after hitting an all-time high of $ 37 on February 20. While the recent losses may seem surprising compared to the gains from other altcoins, LINK nonetheless managed to rebound 640% over the past nine months.
Hence, there should be no reason to interpret the failure to hold above $ 32 as a trend reversal. On-chain indicators such as daily active addresses and transactions as well as the open interest in futures contracts continue to show strength.
Chainlink was also very well positioned to capitalize on the decentralized finance (DeFi) boom. Many of the price feeds that connect separate blockchains and decentralized exchanges use their price oracles for pricing.
The project was proactive as Ethereum’s network fees skyrocketed and quickly adjusted to “off-chain reporting,” which replaced on-chain data aggregation with an off-chain consensus round. As previously reported by Cointelegraph, “the aggregated data is then forwarded to the blockchain, where a smart contract checks whether a quorum of nodes has agreed to this version of the data.”
Despite the strong growth of DeFi and healthy on-chain indicators, the impressive thing is that the LINK price is struggling to reclaim $ 30 support.
On-chain data indicates strength
The transfer value is a leading indicator in the chain that measures user activity as it adds up all the coins moved daily. CoinMetrics’ analysis provides more accurate data by adjusting these numbers to rule out mixers and transactions between the same entities.
Daily adjusted transfers hover around $ 600 million, a cumulative gain of 235% since the beginning of 2021. The current level is double that of Litecoin (LTC), a cryptocurrency with a 7% higher market cap, but the main use of the project case has declined as second tier scaling solutions have evolved.
Daily active addresses are another important metric in the chain, but can be easily expanded if the transmission costs are relatively low. Given that Chainlink runs on the Ethereum network, it certainly couldn’t be.
As can be seen from the data above, Chainlink’s daily active addresses have held over 10,000 despite the recent decline. One should consider Ethereum’s rising network fees, which could explain the failure to hit new highs. Nevertheless, the increase in the indicator by 14% in 2021 can be rated as positive.
The demand for futures contracts remained strong
If top traders had given up Chainlink or somehow lost interest, the open positions in the futures contracts would have been affected. While this metric doesn’t necessarily dictate an upward move, healthy activity in derivatives suggests that investors are interested.
The above data shows no evidence of a decrease in open positions in futures contracts. The sharp drop on February 21st and 22nd reflects the 41% drop in prices. Meanwhile, less than a week later, LINK returned to the support level of USD 26 and open positions in futures continued to increase.
If current bullish market conditions persist, investors could start speculating that an altcoin season is upon us. Right now, Chainlink appears to be well positioned to capitalize on the highest DeFi interest.
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