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Chainlink (LINK) Price Stagnates – Can it Break and Hold Above $20?

4 mins
Updated by Ryan Boltman
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In Brief

  • Chainlink’s Dormant Circulation Supply has witnessed an 87% decrease.
  • Weighted Sentiment plunges to a new low, hitting -1.25, the lowest since July 2023.
  • The confluence of bearish indicators suggests a cautious market outlook.
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Chainlink (LINK) experienced modest growth of merely 1% over the previous month, presenting a distinct divergence from the broader market’s trend, which observed unprecedented peaks in the same timeframe. Alarmingly, a significant reduction in Dormant Circulation Supply coupled with an all-time low in Weighted Sentiment has shed light on the prevailing market sentiment and hints at possible future directions.

Within this article, we thoroughly explore the ramifications of these critical metrics, scrutinize the existing price support levels and resistance barriers, and provide a well-reasoned forecast regarding the future price path of Chainlink.

Between February 6 and March 3, the Dormant Circulation Supply for Chainlink (LINK), over a 180-day period, witnessed a substantial increase from 257,000 to 714,000. This significant growth signals a strong period of accumulation or a consistent holding pattern among investors, implying a collective anticipation of future price appreciation or a demonstration of faith in the long-term value of LINK.

The behavior suggested by this metric during this time frame points towards bullish sentiment, with investors showing a clear preference for holding onto their assets rather than selling them off, expecting potential gains, or believing in the underlying fundamentals of Chainlink.

However, the narrative took a dramatic turn on March 6, when the Dormant Circulation Supply experienced a stark reduction, plummeting from 570,000 to 70,200, translating to an 87.68% decrease.

This precipitous fall indicates that a substantial portion of LINK that had been inactive, not participating in any transactions for over six months, was suddenly mobilized. Activating a large volume of previously dormant LINK could imply a significant shift in investor sentiment or strategic movements within the market.

Chainlink Dormat Circulation (180d).
Chainlink Dormat Circulation (180d). Source: Santiment.

The concept of Dormant Circulation Supply, especially when observed over a period of 180 days, offers profound insights into the behavior of long-term holders within the cryptocurrency ecosystem. However, the sudden and significant drop on March 6 may lead to increased selling pressure in the market.

LINK growth compared with different coins in the past month.
LINK growth compared with different coins in the past month. Source: Messari.

Since Chainlink’s growth is way below that of other cryptocurrencies, longtime holders – represented by Dormant Supply (180d)- could be selling their LINK to have enough liquidity to pursue better opportunities in the market.

The Weighted Sentiment metric for Chainlink has reached a startling low point, diving down to -1.265. The chart below represents the most substantial bearish sentiment the Chainlink community has seen since July 2023.

Weighted Sentiment is an aggregate measure that evaluates the general mood within the market discourse concerning Chainlink, factoring in the relative size of positive versus negative discussions and the frequency of these mentions across social media platforms.

A score in the negative region, especially one as low as -1.265, indicates a dominant bearish overtone in market conversations, with a larger volume of negative commentary, possibly fueled by uncertainties or critical perspectives regarding Chainlink’s prospects.

LINK Weighted Sentiment.
LINK Weighted Sentiment. Source: Santiment.

The significance of the Weighted Sentiment metric extends beyond mere speculation; it serves as an early warning system for investors and market participants, often presaging shifts in market dynamics. When sentiment sours to the degree shown on this scale, it typically signals a contraction in investor enthusiasm, which can translate into reduced buying pressure and, in turn, exert a downward force on Chainlink’s price.

The presence of such negative sentiment concurrently with a notable downtick in the Dormant Circulation Supply paints a bearish to neutral picture for LINK.

Based on the “Global In/Out of the Money” chart for Chainlink price, we can analyze the current sentiment and potential future price movements with a lean towards a bearish to neutral outlook. The chart indicates that a large number of addresses are “In the Money” (profitable), representing 67.16% of the total addresses holding LINK, while a smaller fraction, 29.71%, is “Out of the Money” (unprofitable), and a minuscule 3.13% are “At the Money” (at break-even).

Notably, LINK has established a robust support zone between $15 to $18.50, where many addresses may potentially have acquired their tokens. The presence of this support indicates that should LINK’s price dip into this range, buying activity could increase, as holders might be inclined to purchase more to average their entry price, or new investors may see it as an attractive entry point.

Global In/Out of the Money for LINK.
Global In/Out of the Money for LINK. Source: IntoTheBlock.

Conversely, a formidable resistance zone ranges from $19.75 to $26.75. This suggests that as LINK price ascends towards these levels, it is likely to encounter a sell-off as holders in profit could start to offload their holdings, consequently exerting downward pressure on the price.

This creates a challenging ceiling for LINK to break through, especially if the broader market sentiment does not provide a strong enough tailwind to support an upward breakthrough.

For a reversal of the current bearish to a neutral stance and for LINK to achieve $22 again, it would need to maintain its stance above the support levels, gradually building momentum to tackle the stated resistance.

A shift in the market through consistently positive weighted sentiment or even the approval of a Chainlink ETF, in general, could provide the necessary impetus for LINK to break through the resistance.

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Tiago Amaral
Marketing professional turned coder, passionate about code, data, crypto, and writing. I hold a Marketing and Advertising degree and a Disruptive Strategy certification from Harvard Business School. I love querying blockchain data and discovering insights hidden in data.