As a startup, Chainlink solves a significant obstacle that involves the transfer of data between blockchains and the real world.
The protocol, whose origins date back to September 2014 – a period when half the world hasn’t even heard of blockchains and Bitcoin, provided a solution that enables independent data sources to feed information into public ledgers through a decentralized oracle network.
Flash forward to 2020, Chainlink is now part of 315 blockchain projects, including decentralized financial protocols, data providers, blockchain nodes, and the like.
#Chain link ecosystem growth never slows down with October 29 integrations 🔥
Total $ LINK integrations 315 – including:
View everything here: https://t.co/ZUaUvFgUSd
It should be! pic.twitter.com/IdCX65zNYa
– TheLinkMarine 🦆 (@ TheLinkMarine1) November 1, 2020
Chainlink’s success is also evident in its market cap, which has grown from $ 101 million to $ 4.275 billion in just two years. Of course, the revival has also driven the price of LINK, Chainlink’s internal token, higher; it is up more than 17,000 percent since its launch recently.
Despite Chainlink’s growth as an oracle protocol, the performance of its token remains exposed to the dynamics of supply and demand. The LINK / USD exchange rate peaked at $ 20.71 in August 2020. The pair later experienced a significant sell-off. The move brought the price down a whopping 64 percent – on Sept. 23.
LINK’s dive was a product of a bearish technical setup. As usual, the token bounced back, recovering 79.18 percent. Nonetheless, it remained under bearish pressure as a combination of technical and fundamental signals pointed to a sustained downward bias among traders.
Here are three reasons why LINK has more room to fall in the coming sessions.
# 1 New addresses
The first bearish setup for LINK stems from the number of addresses.
Data retrieved by IntoTheBlock shows that the number of new LINK addresses has hardly moved in the past 30 days. The Chainlink network currently adds an average of 2,000 addresses per day. At best in August, the project integrated about 10,000 per day.
Chainlink's new addresses are declining. Source: IntoTheBlock
That shows a decrease of 80 percent. IntoTheBlock further reported that more than 800 LINK whales with a balance between 1,000 and 10,000 LINK left the Chainlink network before the October shutdown. That also shows that serious traders are selling their LINK property.
# 2 Bitcoin dominance
Chainlink’s solid long-term fundamentals have also fallen prey to a growing Bitcoin dominance in the overall cryptocurrency market during the US presidential election.
More and more merchants have reallocated their capital to Bitcoin, believing that the cryptocurrency would be at the forefront of the winners who will benefit from the second coronavirus boost package. The bill reached a deadlock in Congress after Democrats and Republicans began negotiations on its size.
Bitcoin bulls believe a clear victory for Democratic candidate Joe Biden would make him prove majority in the Senate. The Democrats want a big relief fund for Americans. So their increase in the Senate House would mean more dollar liquidity for the US economy.
Bitcoin touched its three-year high this week on "blue sweep" hopes. Source: BTCUSD on TradingView.com
As a result, the dollar’s purchasing power will fall and, in turn, drive Bitcoin prices higher.
Hence, traders believe it makes more sense to hold their money in the Bitcoin market. That hurt LINK in the short term.
# 3 LINK Bear Flag and 30% price correction
With two concrete bearish fundamentals lurking over LINK, a technical setup further confirms the downward outlook for the token. It has to do with a “Bear Flag.”
LINK bearish setup. Source: LINKUSD on TradingView.com
The bearish continuation pattern typically surfaces during a downtrend. It looks like an upward channel after a strong downward move, but eventually breaks below the lower trend line to continue to decline. The ideal bearish target here is as low as the height of the pole (downward arrow in the chart above).
Nevertheless, LINK has adequate levels of support even if it is below the Bear Flag pattern. The first of such price bottoms is $ 7.15, down nearly 30 percent. The second is $ 4.90, down 50 percent from current levels.
If the above fundamentals hold, the LINK / USD pair could test $ 7.15 for a rebound.