The price of Chainlink (LINK) price soared 16% to a 2024 peak of $16 on Jan. 17, shortly after Blackrock CEO Larry Fink made bullish comments about asset tokenization.
In a Bloomberg television interview on Jan. 12, Blackrock CEO Larry Fink stated that asset tokenization is the “next step” for institutional involvement in the cryptocurrency sector. Chainlink is a leading blockchain oracle providing offline price feeds to asset tokenization projects.
Market data suggest that the recent uptrend in the LINK token price may have been driven largely by Larry Fink’s comments.
Chainlink price bounce not accompanied by commensurate growth in network usage
Asset tokenization is one of the leading narratives for crypto markets in 2024. Several large tradfi institutions ranging from JPMorgan to SWIFT have made giant leaps into the crypto asset tokenization and Real World Asset (RWA) sector over the past year.
Chainlink is positioned at a critical intersection between defi and tradfi. By bringing offline price and data points on-chain, Chainlink offers critical services to support the burgeoning real world asset sector.
Chainlink is positioned to capture value from the asset tokenization wave, particularly in the long-term as its price feeds users are required to stake units of LINK to get access to key technical features.
Unsurprisingly, Chainlink price soared 16% from $13 to $16 within 48 hours after Larry Fink’s positive asset tokenization comments during a Bloomberg interview on Jan 12.
However, critical on-chain data show that the LINK price rally could be scuttled in the short-term. Santiment daily active addresses (DAA) metric tracks network participation rate, by aggregating the number of unique wallet addresses interacting on a given day.
The chart below illustrates that while LINK price soared 16% between Jan. 12 and Jan. 17. Meanwhile, Chainlink DAA only rose by 4% from 3,749 to a peak of 3,910 during that time frame.
An increase in daily active addresses is a proxy for measuring how many users are deploying contracts and carrying out transactions on a blockchain network during a given period. An increase typically indicated growing network demand which is ultimately bullish for the native token price.
But conspicuously, LINK’s 16% price surge in the last 5 days has not been accompanied by a substantial increase in network usage. This is a tell-tale signal that the current price rally is being driven largely by speculative swing traders latching on to Larry Fink’s bullish comments on institutional participation in asset tokenization.
Without a significant increase in Chainlink’s fundamental growth metrics, LINK price could struggle to sustain the upward momentum.
Chainlink whales are booking profits behind the scenes
Furthermore, Chainlink’s largest investors have been spotted capitalizing on the ongoing LINK price rally to book profits, likely affirming the short-term bearish outlook. Santiment’s supply held by top addresses metric tracks the balances held by a cryptocurrency ecosystem’s largest investors in real-time.
The top 150 Chainlink whale wallets held a cumulative balance of 750.8 million LINK as of Jan 2. Since then, they have intensified their selling spree.
Between Jan 12 and Jan 17, they have sold 2.3 million LINK tokens, cutting their balances down to 748.5 million LINK.
Value at the current prices of $15.8, Chainlink 150 largest investors have sold off LINK tokens worth $36 million in the last two-weeks. Singularly, a decline in balances held by large investors is often interpreted as a bearish signal.
But more importantly, it shows that the whales have not snapped out of their year-long selling spree, despite Larry Fink’s recent positive comments on asset tokenization.
If it persists, their outsized sell-orders could eventually crowdout the bullish retail traders, putting LINK price under intense downward pressure.
Forecast: Chainlink price unlikely to reach $20 in the short-term
From the on-chain data trends analyzed above, the recent Chainlink price rally appears mainly driven by speculative trading. Without a significant uptick in fundamental growth metrics like network usage and whale accumulation, LINK price could struggle to reach the $20 mark in the short-term.
However, if the momentum flips bearish as predicted, the bulls can find initial support at the $14.5 area.
IntoTheBlock’s global in/out of the money (GIOM) chart outlines key support and resistance levels by identifying historical entry prices of the current LINK holders.
42,190 existing Chainlink investors had acquired 112.5 million LINK at the minimum price of $14.5 as depicted below.
In the short-term, they could make short-covering maneuvers to avoid slipping into a net-loss position. If this scenario plays out, LINK price will likely consolidate just below the $15 mark in the coming days.
On the flip side, the bulls could negate this bearish outlook if they can flip the $20 territory. But as seen above, 94,850 holders had acquired 50.6 million LINK at the minimum price of $18.8. The bears could mount a significant sell-wall around, at that area, and inadvertently trigger a retreat.
