Chainlink Plummets Despite $100M Partnership—Is $8 on the Horizon?

Key Insights:

• Chainlink’s price slides 4.1%, testing key support levels despite a $100M partnership with Superstate.
• On-chain metrics reveal potential sell-off risks as large LINK holders reduce their activity and exchange inflows increase.
• Technical indicators suggest continued bearish momentum, with LINK trading below key EMAs and a potential drop to $8.00.

Chainlink’s price has recently experienced a significant downturn, dropping 1.7% over the past 24 hours to $10.35. This decline comes despite positive news of Chainlink’s latest partnership with Superstate, an asset management firm that oversees more than $103 million in assets. 

The collaboration involves integrating Chainlink’s Price Data Feeds into Superstate’s tokenized treasury fund, aimed at enabling on-chain tracking of the fund’s net asset value. However, the market’s response has been less than enthusiastic, reflecting in the price drop and ongoing bearish sentiment.

Asset management firm @superstatefunds is now leveraging #Chainlink’s infrastructure for tokenized assets.

How Chainlink Data Feeds and soon Proof of Reserve help bring critical NAV and AUM data onchain for Superstate’s USTB tokenized treasuries fund ↓https://t.co/4rrW2VcY05 pic.twitter.com/K3OA6GnhAi

— Chainlink (@chainlink) August 12, 2024

Chainlink’s price is trading below key moving averages, with the 50-day EMA at $10.94 and the 200-day EMA at $12.72, indicating a bearish trend. The recent price action suggests that investors are wary, and the formation of a bearish rising wedge pattern, which has broken to the downside, further supports the potential for additional losses. 

Currently, the price is retesting the lower boundary of this wedge, a key level that could determine LINK’s next move.

On-Chain Metrics Indicate Potential Sell-Off

On-chain data has raised concerns about a potential sell-off, with several indicators pointing to increasing bearish pressure. According to IntoTheBlock, the net flow of large LINK holders is negative by 17%. 

Source: IntoTheBlock

Over the past week, these holders have seen a noticeable reduction in inflows and outflows, suggesting that some are still offloading their LINK tokens. This behavior could contribute to the ongoing price decline, as large holders typically significantly influence market dynamics.

Furthermore, data from CryptoQuant indicates a slight increase in Chainlink’s exchange inflow over the last 24 hours, which could imply that more investors are preparing to sell. This increased inflow to exchanges often precedes further price drops, suggesting that investors position themselves to liquidate their holdings. 

Source: CryptoQuant

The combination of reduced large-holder activity and increased exchange inflow paints a cautious picture for the near-term price action of Chainlink.

Technical Indicators Signal Continued Bearishness

The technical analysis of Chainlink’s price action underscores the bearish outlook. The daily chart shows that LINK is trading near the lower Bollinger Band, which generally indicates potential oversold conditions. The wide bands reflect recent high volatility, and while a short-term recovery could occur, the overall market sentiment remains negative. 

This bearish bias is further supported by the RSI, which is currently at 39.61. Although not in oversold territory, the RSI indicates weak momentum, with sellers maintaining control over the market.

The MACD indicator also supports the bearish trend, with the MACD line below the signal line, both in negative territory. Although the red histogram bars are shrinking, suggesting that selling pressure may be easing, a bullish crossover has not yet occurred. This situation warrants caution for traders, as the potential for a continued downtrend remains. 

Source: TradingView

The Awesome Oscillator (AO) further confirms this outlook, with negative bars below the zero line, indicating that bearish momentum is still in play.

Support and Resistance Levels to Watch

For traders and investors closely watching Chainlink’s price action, key support and resistance levels are critical to consider. The immediate resistance is at the 50-day EMA, currently at $10.94, followed by the 200-day EMA at $12.72. These levels represent significant hurdles that the price would need to overcome to shift the market sentiment to a more bullish outlook. However, given the current bearish conditions, these resistance levels may prove challenging to breach.

On the downside, the lower boundary of the rising wedge pattern is the first key support level currently being tested. Should the price break below this level, the next major support lies around the $8.00 mark. 

This support level is crucial, as a breakdown below it could lead to further significant declines. Traders should monitor the price action closely, as volume and momentum indicators will play a vital role in confirming any potential breakdown or reversal.

Editorial credit: Ira Lichi / Shutterstock.com