Chainlink has a lot of upside potential, but are there any good entry points?

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With Bitcoin leading the market gains, with a weekly price increase of nearly 16.90 percent, the rest of the market has remained relatively calm. While the market appears to be steadily rising on the back of Bitcoin gains, most alts have failed to surprise the market. Chainlink, the 15th most valuable altcoin by market cap, has also seen relatively flat price action.

However, while the alt’s long-term prospects appeared promising, market confidence in the alt appeared to be lacking, so where could LINK go from here?

Classic case of frustration and difficulty 

In the last quarter of 2020, Chainlink was in the top 5 crypto-assets in the space. With Defi exploding many altcoins took off but LINK’s rise relative to the market was low. Now as the alt lost almost 10 ranks and sits on the 15th position, in terms of importance and pecking orders, the asset seems to be well away from investors’ spotlight.

LINK’s market looked stagnant in terms of cash inflows as its Relative Strength Index maintained a horizontal trend for almost a week on a daily chart. This sort of a constant trajectory was indicative of lacking cash inflows, and confusion in the market about LINK’s price. Seemingly, LINK’s price was in a cloud and presented a classic case of frustration and difficulty for traders.

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Upside potential persists 

On the weekly chart, LINK was sitting on a bottom and it was notable that while the downside risk is limited the alt’s upside potential looks good. Analyst, Nelson Paul added that placing a bet on LINK for the upcoming months could be a good strategy and as ‘the alt can target three-digit price.’

Notably, aside from announcements of collaboration with other blockchain projects, LINK has played a critical role in the Defi as well as the NFT space owing to its oracles. Chainlink oracles provide real-time data to smart contracts, making it easier to trade these NFTs.

Spartan Hill, a fintech firm, recently announced that it will use Chainlink Price Feeds to power a new decentralised Colombian Peso stablecoin called Daily (DLY). While these development-focused updates haven’t had much of an impact on LINK’s price, metrics have painted a bullish picture for the altcoin.

So, is this a good entry point? 

Notably, LINK’s NVT was at an ATH at the time of writing. These high values were last seen in July 2020. This could either mean that the network valuation was outstripping the value being transmitted. It can happen when the network is in high growth and investors are valuing it as a high return investment. On the other hand, its active addresses were nearing all-time low levels which were worrying.

Source: Glassnode

However, a decrease in the Herfindahl Index, indicating that funds are becoming more evenly distributed across addresses, was a positive sign for the network. Furthermore, MVRV (7-day) for the asset had bottomed, indicating a reversal that could benefit the alt.

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Even though it was negative, LINK’s short-term ROI was only -0.89 percent, which was not too bad, while its three-month and one-year ROI were +47.91 percent and +181.69 percent, respectively. As a result, with LINK’s prices remaining stagnant and the alt showing upside potential, levels below $28 appear to be a good entry point into the market.

 

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