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Chainlink Looks Ready to Retest All-Time Highs

Key Takeaways

  • The decentralized oracles token has been consolidating within a narrow trading range for over the past month.
  • Throughout this time, bullish momentum has been quietly building up.
  • An increase in the buying pressure behind LINK may see it rise towards early-March highs of $5.

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With another Bitcoin halving written in the history books, investors have grown overwhelmingly optimistic about what the future of crypto has to offer. And, different altcoins, including Chainlink, appear to be on the cusp of a major bullish breakout.

Chainlink Consolidates Within a No-Trade Zone

The decentralized oracle token has been consolidating within a narrow trading range over the past month.

This stagnation phase between $3.6 and $4 led the Bollinger bands to squeeze on LINK’s 1-day.

Squeezes are indicative of periods of low volatility and are typically followed by wild price movements. The longer the squeeze, the higher the probability of a strong breakout.

This technical index does not necessarily indicate whether Chainlink will move up or down. As a result, the area between the lower and upper band is a reasonable no-trade zone.

A candlestick close below or above this area will help determine the direction of the trend.

Chainlink US dollar price chart
LINK/USD on TradingView

Based on the Fibonacci retracement indicator, the no-trade zone is defined by the 38.2% and 23.6% levels. These support and resistance levels sit at $3.7 and $4.2, respectively.

A spike in the selling pressure behind Chainlink that allows it to move past support may see the altcoin fall towards the 50% or the 61.8% Fib. Conversely, if the demand picks up, LINK could be poised to test early March’s swing high of $5.

Chainlink US dollar price chart
LINK/USD on TradingView

Technical Indexes Scream Buy

Despite the ambiguity mentioned above, several technical indexes estimate a higher probability that LINK will breakout in an upward direction.

For instance, a golden cross formed within LINK’s daily chart.

This technical pattern developed the moment the 50-day moving average moved above the 100-day moving average. Some of the most prominent technical analysts in the industry see this pattern as one of the most definitive buy signals that could start a bull market.

The last time these moving averages formed a golden cross on Chainlink’s 1-day chart was in late October 2019 and early February 2020. Following these bullish formations, LINK surged by 25% and 60%, respectively.

Now, a similar scenario could take place.

Chainlink US dollar price chart
LINK/USD on TradingView

In addition to the golden cross, the moving average convergence divergence, or MACD, adds credence to the optimistic outlook.

This technical indicator, which follows the path of a trend and calculates its momentum, appears to be turning bullish within the same time frame for the first time since late March.

As the 12-day exponential moving average moved above the 26-day exponential moving average, the odds for a bullish impulse increased significantly.

Chainlink US dollar price chart
LINK/USD on TradingView

Finally, the price action seen over the last few hours allowed the parabolic stop and reverse, or “SAR,” to have a bullish flip over.

Every time the stop and reversal points move below the price of an asset, it is considered to be a positive sign. But, when the SAR points move above the price, it can be viewed as a bearish signal.

By taking in aggregate the golden cross, the MACD, and the stop and reversal system, it is reasonable to assume that Chainlink’s uptrend is about to resume.

Chainlink US dollar price chart
LINK/USD on TradingView

On-Chain Metrics Support the Bullish Outlook

With so many technical indexes screaming buy, many holders of at least one million LINK, colloquially known as whales by crypto traders, have been increasing rapidly over the past week.

Data from Santiment shows that the number of addresses holding between 1 million to 10 million LINK surged by more than 7%.

The sudden increase in LINK whales could suggest that something big is brewing behind closed doors.

Chainlink's Holders Distribution by Santiment
Chainlink’s Holders Distribution by Santiment

If this is the case, IntoTheBlock’s “In/Out of the Money Around Price” (IOMAP) model shows that token still needs slice through the 2,150 addresses that bought over 1.2 million LINK at an average price of $4.2 before moving to the next primary supply wall.

This limit sits at $4.40.

Here, roughly 2,300 addresses purchased 2.75 million LINK. Breaking through this barrier may see LINK rise to $5 or even higher since there are few barriers beyond the $4.33 to $4.45 level.

In/Out of the Money Around Price by IntoTheBlock
In/Out of the Money Around Price by IntoTheBlock

The Crypto Market Moving Forward

The recent Bitcoin halving has been a catalyst for renewed interest in the cryptocurrency market.

Alistair Milne, co-founder and CIO of Altana Digital Currency Fund, affirmed that Google searches for the keyword “bitcoin halving” skyrocketed by 9x compared to the last block rewards reduction event in 2016.

This trend is declining now that the halving took place, but full-time crypto trader Philip Swift said that Blockchain-related searches on Chinese messaging app WeChat continue rising steadily.

With so much interest in the industry, one could argue that the market is bound for a steep correction. However, Glassnode’s Puell Multiple index shows that Bitcoin is still undervalued even after the massive gains posted after March’s Black Thursday.

Historically, bear markets tend to end when the Puell Multiple drops below 0.50, which is precisely what is currently happening.

Bitcoin's Puell Multiple by Glassnode
Bitcoin’s Puell Multiple by Glassnode

Even though these data sets refer to the flagship cryptocurrency, the high level of correlation in the market suggests that if Bitcoin goes up, the rest of the market, including Chainlink, will follow.

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