Chainlink Faces Uncertain Times in the Cryptocurrency Market

$12.28

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DeFi Data and Whale Movements: Insights

According to DefiLlama, the total value locked (TVL) in Chainlink-based DeFi applications has dropped remarkably, from $1.13 billion at the end of August to about $545 million. During the same period, there has also been a consistent decline in weekly transaction fees. These declines in TVL and fees suggest a waning demand for Chainlink services and a slowdown in ecosystem usage.

The on-chain stagnation appears to have led to a decline in interest from major investors, known as whales. Nansen data reveals that the amount of LINK held by whales decreased by 2% in the last seven days, falling to 1.84 million units. Meanwhile, the total LINK balance on exchanges has increased by 2.7% to 226.73 million units, indicating a potential strengthening of selling pressure. This scenario escalates the downward risks on the price in the short term.

Technical Outlook and Potential Scenarios

The weekly chart for Chainlink calls for investor caution. It highlights a multi-year “double top” formation, with the peaks forming around $28.06 and the neckline situated at $11.08. In technical analysis, such formations are often precursors to significant downturns.

Momentum indicators also emit negative signals. The MACD indicator has moved below the signal line, with both lines trending downward, suggesting that sellers maintain their dominance in the market. The RSI stands at approximately 37.7, indicating that it has not yet entered the oversold territory. This suggests that there is still room for downward movement before a potential recovery.

A critical level to watch is $11.08. A potential break below this level could result in the price falling to $8 or even the robust support level of $5 that was established during the 2022-2023 period.

While Chainlink’s weakness continues, competition in the oracle space is intensifying. Recently, projects like Pyth Network and Band Protocol have increased their integrations with different blockchains, intensifying competition in the data oracle market. Collaborations with Solana and new generation Layer-2 solutions provide developers with alternative oracle options, making it increasingly important for Chainlink to offer new use cases and updates to maintain its market share.