Chainlink (LINK), a decentralized oracle network, has been battered in recent weeks, falling over 12% and reaching multi-month lows. However, on-chain metrics are hinting at a potential turnaround, with analysts predicting a near 10% recovery in the price of LINK.
One key indicator is the decreasing supply of LINK on exchanges. According to Santiment, a blockchain analytics platform, the supply of LINK on exchanges has dropped nearly 3% in the past two weeks. This suggests that investors are moving their LINK holdings off exchanges, potentially reducing selling pressure and paving the way for a price increase.
Another bullish signal comes from the Network Realized Profit/Loss (NRPL) metric. NRPL tracks the profit or loss made by investors when they trade an asset. Recent data shows that LINK holders have been experiencing significant losses, with over $47 million realized between June 24th and July 8th. This capitulation event, where investors sell their holdings at a loss, could be a sign that the market is oversold and ripe for a reversal.
The Market Value to Realized Value (MVRV) ratio adds further weight to the bullish thesis. MVRV compares the current market capitalization of an asset to the total USD value at which all existing coins were last moved on-chain. A negative MVRV reading, as seen with LINK‘s current 30-day MVRV of -9.34%, historically indicates periods of potential price reversals.
Technically, Chainlink recently dipped into a price zone known as a “Fair Value Gap” (FVG) between $11.62 and $12.11. This gap represents an area where there was a significant drop in price with minimal trading activity. Since then, LINK has shown signs of recovery, suggesting it may attempt to fill this gap and reach the lower boundary of the imbalance zone between $13.73 and $14.24, representing a potential price increase of over 10%.
However, some hurdles remain. A daily candlestick close below $12.54 could invalidate the bullish outlook and send LINK back down to its July 5th low of $11.05. The psychologically important $16 level will likely act as the next major resistance zone if the recovery materializes.
While the future remains uncertain, on-chain metrics suggest a potential turnaround for Chainlink. With continued accumulation and resistance to further sell-offs, a price recovery for LINK seems to be on the horizon.
