Chainlink (LINK) had a very tough month, falling as much as 45% after hitting a new all-time high of $ 37 on February 20th. While the recent losses may seem astonishing when compared to the gains of other altcoins, LINK was able to increase 640% in the last nine months.
Hence, there should be no reason to interpret the failure to stay above $ 32 as a trend reversal. On-chain indicators such as daily active addresses and deals, as well as open interest in futures contracts continue to show strength.
Chainlink was also very well positioned to capitalize on the popularity of decentralized finance (DeFi). Many of the price feeds that connect separate blockchains and decentralized exchanges use their price oracles for pricing.
The project was proactive as the fees for the Ethereum network skyrocketed and quickly adjusted to the network “Off-chain reports”, This replaced the aggregation of data in the chain with an out-of-chain consensus round. As Cointelegraph previously reported, “The aggregated data is then passed to the blockchain, where a smart contract checks whether a quorum of nodes has agreed to this version of the data.”
Despite the strong growth in the DeFi sector and healthy on-chain indicators, it is impressive that the LINK price is struggling to regain support at USD 30.
On-chain data reflects the robustness
The value of transfers is an important indicator in the chain that measures user activity. because it adds all the coins that are moved daily. CoinMetrics analysis provides more accurate data by adjusting these numbers to rule out mixers and transactions between the same entities.
Daily adjusted transfers are around $ 600 million. This corresponds to a cumulative gain of 235% since the beginning of 2021. The current level is twice that of Litecoin (LTC), a cryptocurrency with a 7% higher market capitalization. The main use case of the project, however, has declined with second tier scaling solutions.
Daily active addresses are another important metric in the chain, but can be easily expanded if the transmission costs are relatively low. Given that Chainlink runs on the Ethereum network, it certainly could not.
As can be seen from the data above, despite the recent drop in prices The daily active Chainlink addresses have remained over 10,000. We have to take into account the rising fees of the Ethereum network which could explain the impossibility of hitting new highs. However, the increase in the indicator by 14% in 2021 can be considered positive.
The demand for futures contracts remained high
If professional traders had given up Chainlink or somehow lost interest, the open interest in futures contracts would have been affected. While this metric isn’t exactly bullish, a healthy amount of derivative activity suggests that investors are interested.
The above data shows no evidence of a decrease in open positions in futures contracts. The sharp drop from February 21 to 22 reflects the 41% drop in prices that has occurred. In the meantime, less than a week later, LINK returned to the support level of USD 26 and the open interest in futures continued to rise.
If current bull market conditions persist, investors could start speculating that an altcoin season is coming. Right now, Chainlink appears well positioned to capitalize on the surge in interest in DeFi.
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