Massive Drawdowns and Potential Trend Reversal
Chainlink (LINK) has experienced significant drawdowns recently, which could signal a potential trend reversal. The price chart analysis supports this scenario, although whale interest appears mixed. Negative market sentiment has driven LINK to both short and long-term trend lows, presenting substantial discounts for the altcoin. According to data, these drawdowns might justify taking advantage of the discounted prices.
Historically, the more “blood in the street” there is from other traders, the more justification there is to buy into others’ pain. This sentiment is based on the Market Value to Realized Value (MVRV) metric, which assesses the token’s valuation. A negative MVRV value indicates that a token is undervalued and a good buy, while a positive value suggests it is overpriced and might prompt holders to sell for profit.
MVRV Analysis and Investment Opportunities
For LINK, the MVRV ratio has decreased by 11% and 18.7% on a monthly and yearly adjusted basis, respectively. This decline positions LINK as an attractive buy for both short-term and long-term investors. The question remains: does the price chart also support the idea of buying LINK?
In early 2024, LINK rallied by 87%, surging from $12 to $22, offering about 1.8 times returns for those who held it during the first three months of the year. However, it lost all these gains in Q2, and an attempted recovery also resulted in losses. Currently, LINK is trading at $11.59 and is on track to hit the June low of $11.05.
Key Demand Zones and Market Sentiment
The $11 level has been a crucial demand zone throughout the year, supporting the thesis that LINK could be a great buy for swing traders aiming to go long. If market sentiment improves, the immediate bullish target above $14 could offer a 30% return. However, if weak sentiment persists, LINK could drop below $10, exacerbating the market downturn.
Interestingly, a whale cohort has been going long at the current lows and demand level. Addresses holding between 1 million to 10 million LINK have been accumulating since late July and have ramped up their buying spree in August. They now control 19% of the LINK supply.
Whale Activity and Market Dynamics
Despite this accumulation, current sell pressure seems to come from addresses holding 10,000 to 100,000 coins and 100,000 to 1 million coins. Collectively, these two groups control about 20% of the LINK supply, almost equal to the cohort that is accumulating. Tracking Bitcoin’s (BTC) next direction could be crucial in determining whether LINK will bounce from the $11 demand zone.
In summary, while LINK’s recent price action and whale activity present a mixed picture, the significant drawdowns and key demand zones suggest potential buying opportunities. Investors should closely monitor market sentiment and whale activity to make informed decisions.
