The cryptocurrency market has so far proved that the most promising blockchain projects are those that solve a specific inefficiency in the market. Chainlink happens to be in this category as a project that delivers oracle services to blockchain networks.
Oracles provide essential on-chain and off-chain data that makes it possible for smart contracts to operate optimally. This makes it a critical component for the success of the blockchain networks and it highlights the potential increase in demand for its services as those networks continue to grow.
Ethereum, which already uses Chainlink to access oracle data has been going through some radical changes to its infrastructure. If all goes as planned, Ethereum 2.0 might help the network achieve more adoption and this means more demand for Chainlink’s services, and subsequently the LINK token. The demand will be more parabolic especially if there is continued adoption by other networks. These factors have the potential to boost investment in the LINK token.
Link token price analysis
The LINK token is currently trading at $18.20 after rallying by 1.78% in the last 24 hours at the time of this press, but zooming out to its weekly performance reveals that it is down by 16.43%. The bearish performance reflects the state of the entire cryptocurrency market which has been dominated by the bears since the start of December.
LINK’s performance in the second half of 2021 has been overall bearish. The cryptocurrency hit an all-time high above $52. Some of the top cryptocurrencies managed to achieve new ATHs during the August and October rallies but Link did not manage to reach its previous peaks.
The recent downturn has so far pushed the price of LINK below its 50-day and 200-day moving average and its RSI is currently hovering around 35, indicating that it is still not oversold at its current price. This suggests the likelihood of more downside if the current market conditions prevail. On the other hand, a change in market sentiments could fuel another rally, making LINK a good candidate for riding the bullish momentum given how much its price action has been suppressed lately.
If the bearish momentum continues, the price of LINK is expected to experience structural support between $13 and $15. If that happens, then the price will be oversold, which means it will be in an attractive price range for buyers.
LINK’s potential upside
There is no doubt that LINK has the potential to reach its previous ATHs given the demand for Chainlink oracle services. It might even set new ATHs especially as demand continues to increase. LINK is a mid-cap coin and some of the projects with similar circulating supply have so far managed to achieve market caps above $20 billion. Chainlink’s market cap is currently at $8.5 billion.
Competition from other rival projects offering oracle services is on the rise, but Chainlink has the first-mover advantage. The fact that it was adopted by Ethereum, the biggest blockchain network makes it more appealing to other projects and this might help provide a significant boost to its adoption and market cap in the long run.