Chainlink (LINK) On-Chain Metrics Signal Potential Rebound Amid Price Volatility in 2023

Chainlink (LINK) On-Chain Metrics Signal Potential Rebound Amid Price Volatility in 2023

Crypto News – Chainlink (LINK) achieved a new peak for the year 2023, reaching $16 on November 9th, only to experience a subsequent 10% decline, falling below the $14.50 mark due to bearish pressure. However, key on-chain metrics are indicating positive signals that suggest the potential for a rapid rebound.

The recent pullback from LINK’s yearly high of $16 has led some to wonder whether the Chainlink price rally is coming to an end or if it presents a buying opportunity.

A closer look at on-chain data reveals that a majority of LINK holders are still positioning themselves for further gains. Despite a 10% decline to a daily low of $14.40, it’s evident that most LINK holders are inclined towards a sustained price rally.

Data from CryptoQuant illustrates this sentiment shift. Investors previously held a total of 149.9 million LINK in exchange-hosted wallets. However, as of November 10th, this number has decreased to 148.5 million LINK. In essence, over the course of the week, investors have withdrawn 1.4 million LINK tokens from exchange-hosted wallets. This reduction eases concerns of a large-scale sell-off.

Exchange reserves, which monitor real-time changes in the number of tokens deposited across crypto exchanges, typically reflect a decrease in supply across exchange spot markets. At the current price of $14.50 per LINK, the withdrawal of 1.4 million LINK from exchanges amounts to approximately $20 million being removed from the exchange spot markets this week.

Furthermore, when investors opt for cold storage during a price correction, it often indicates a preference for holding (HODLing) rather than participating in a sell-off. If demand for LINK remains steady, the scarcity created by the decrease in market supply usually triggers a price rebound.

Interestingly, LINK’s recent price breakout, which began around September 21st, coincided with a decline in LINK exchange reserves. If this pattern repeats itself, the removal of 1.4 million LINK from exchange-hosted wallets this week could potentially exert upward pressure on Chainlink’s price.

Another notable factor contributing to LINK’s price surge is the increase in its New User Acquisition Rate. Chainlink’s price has been on an upward trajectory since mid-September, with on-chain data indicating that the rising number of new Chainlink users has been a major catalyst for this rally.

Fueled by global interest in asset tokenization and the demand for Real World Assets (RWA), Chainlink has attracted an unusually high number of new users in recent months. As depicted in the data, Chainlink’s new user acquisition rate reached a four-month peak of 3,004 addresses on a recent Thursday.

The New Addresses metric tracks the rate at which a blockchain network attracts new users by tallying the creation of new Chainlink wallets daily. An increase in new wallets logically translates to users creating new accounts, which subsequently leads to increased demand for LINK tokens.

Thus, despite the recent correction across the crypto market, the heightened demand from new users joining the Chainlink network could serve as a support factor for LINK prices.

In terms of LINK’s price prediction, the aforementioned on-chain metrics suggest that Chainlink may soon break out of its consolidation phase. Data from the Global In/Out of the Money (GIOM) analysis, which categorizes current Chainlink investors based on their entry prices, supports this bullish outlook.

However, it’s important to note that Chainlink’s price will need to surpass the initial resistance level at $15.40 for the bulls to gain confidence in reclaiming $20. Currently, 49,290 holders own 22.42 million LINK at the minimum price of $15.40. If these holders decide to sell early, it could potentially slow down the price rally.

On the contrary, if the bulls manage to break through this resistance level, Chainlink’s price is likely to reach the predicted $20 mark.

Nevertheless, it’s essential to remain cautious, as the bears could invalidate this optimistic scenario if Chainlink’s price drops below $10. In such a case, the 50,730 holders who acquired 62.5 million LINK at the maximum price of $10.85 could form a support barrier. If these investors maintain their commitment to holding (HODLing), Chainlink is likely to avoid a significant price retracement.