Chainlink Price Surges Amid Market Optimism, Eyes Potential Correction

Chainlink Price Surges Amid Market Optimism, Eyes Potential Correction

Chainlink (LINK) has experienced a strong upward trend, gaining over 25% in the past week, significantly outperforming the top 20 cryptocurrencies. However, a short-term retracement of about 7% is anticipated as LINK approaches a critical support level. This point could either serve as a springboard for a renewed rally or trigger a further decline, potentially invalidating the current bullish outlook. LINK is currently down 6.1% for the day, reflecting the broader market downturn that saw the total crypto market cap drop by 2.6%, according to CoinGecko data.

What’s Behind Chainlink’s Recent Price Surge?

Chainlink’s rally began on August 21, following Sony’s announcement of their new blockchain platform, Soneium. The surge in LINK’s price is largely attributed to speculation about a partnership between Sony and LINK, driven by Sony’s decision to utilize Chainlink’s Cross-Chain Interoperability Protocol (CCIP) in their development process.

Johann Eid, Chainlink’s Chief Business Officer, confirmed that Soneium would integrate LINK CCIP as its primary cross-chain infrastructure. Additionally, developers on Soneium will have access to Chainlink’s Data Feeds, Functions, and Verifiable Random Function (VRF) through the LINK Scale program, enhancing the platform’s developer ecosystem.

Although LINK’s price is currently experiencing a pullback, enthusiasm around the Sony partnership remains strong within the Chainlink community.

Futures Traders Bet on a Short-Term Decline

Despite the positive news for LINK, futures traders are largely betting against LINK, opening substantial short positions according to Coinglass data. This could be due to profit-taking following LINK’s significant weekly gains, leading to the current price retracement.

On the daily chart, LINK is trading below the 50-day exponential moving average (EMA), with the next major support level around $10.87. This represents a potential 7.6% decline from the current price, aligning with the targets of futures traders who anticipate further downside.

Additionally, a significant sell wall between $12.11 and $12.51 could pose a challenge for LINK’s price to rise. However, if bulls manage to push through, short traders could face liquidation.

What’s Next for Chainlink?

If LINK manages to rebound from the $10.87 support level, it could rally by 27% to $13.87, where it will encounter the 200-day EMA—a key resistance level that has capped LINK’s price for the past 72 days. Breaking above this resistance could set the stage for further gains, potentially driving LINK up another 37% to $19.28, with an eye on $22.91 to challenge the yearly high.

Overall, the outlook for Chainlink remains bullish, with the anticipated short-term dip likely being a healthy correction within the broader uptrend.