Chainlink Price Faces Uncertainty After Rejection at $12.50, Potential 48% Drop Looms

Chainlink Price Faces Uncertainty After Rejection at $12.50, Potential 48% Drop Looms

Chainlink’s price action is under pressure after being rejected at the $12.50 resistance level, placing LINK in a vulnerable position. If market conditions remain unchanged, the digital asset could face a significant decline of up to 48%, as the recent rejection confirms a multi-month bearish reversal pattern. On-chain metrics further suggest a steep downturn could be imminent for the Oracle service provider unless the broader market sentiment shifts. Over the last 24 hours, LINK has dipped by 2%, currently trading at $11.18.

Chainlink Price Signals Risk of Overvaluation

According to data from Santiment, Chainlink’s Network Value to Transactions (NVT) ratio has reached a three-year high as of August 29. A heightened NVT ratio indicates that LINK’s market value is disproportionately high relative to the transaction activity on its network, a potential red flag for overvaluation.

Moreover, the Chainlink Price-Daily Active Addresses (DAA) divergence has dropped to a one-month low at -59%, suggesting that LINK’s price movement is diverging negatively from its daily active addresses. Despite the price increase in early August, the number of unique addresses interacting with LINK has remained largely stagnant, pointing to weakening market sentiment and diminishing interest in the asset.

In addition, the daily profit ratio for LINK has been on a downward trend over the past week, currently standing at 0.66. This ratio indicates that for every LINK transaction resulting in a loss, only 0.66 transactions are profitable, signaling a net loss overall.

This bearish indicator could lead to decreased investor confidence, potentially triggering sell-offs and further depressing Chainlink’s price.

Despite these warning signs, investor sentiment around Chainlink remains optimistic, bolstered by recent high-profile partnerships, including a collaboration with Sony’s new blockchain project, Soneium.

LINK Price Analysis: $6 Is the Key Level to Watch

A thorough analysis of Chainlink’s price chart corroborates the on-chain data. The daily LINK chart reveals a multi-month head-and-shoulders pattern, which breached the neckline in early August, retested it recently, and faced rejection.

This development is concerning for LINK investors as:

• A head-and-shoulders pattern typically signals a transition from a bullish to a bearish trend.
• With the price having broken below the neckline, retested it, and been rejected, LINK could potentially plummet to $3.66, with $6 being a possible support level.

Unless the market dynamics shift, the outlook for Chainlink remains bearish.

On the other hand, if LINK manages to break above the neckline and sustain that level, it could indicate renewed market strength, potentially pushing the price up to $14 or $18, where the next major resistance levels lie.