Chainlink (LINK) is one of the leading blockchains used in tokenization and borderless money transfers. However, LINK fell by around 4% in the last 24 hours with prices below the 200-day moving average.
However, LINK’s price weakness appears to be coming to an end, at least in the short term. Here’s why Chainlink may be on the verge of a bullish reversal.
Sellers run out of steam as LINK rejects support for the third time
LINK price fell below an ascending trend channel in late May. The move coincided with the broader crypto market, which has been weak since late last year, although activity continues to boom.
After the breakdown, sellers pushed the altcoin to the February low of $7.265 but faced mild rejection. The rebound propelled the price past $8, but has since returned to this support level, and it appears to be holding.
This is the third touch of the $7.20 support and from the looks of it, the sellers are running out of steam. For example, the momentum indicator is falling and has become negative.
A deeper analysis over a shorter period shows that sellers are indeed exhausted. The four-hour candles are consolidating around $7.280 and the MACD bars are weakening. This means sellers are exhausted.
However, LINK price has rebounded from the 0.618 Fibonacci retracement level, indicating that the ongoing decline could be strong in hindsight. But for the downtrend to continue, it depends on LINK moving below the $7.20 area.
Additionally, overall liquidations have decreased significantly. This is an indication that volatility has also declined, a signal that precedes expansion.
For example, over 1 million LINK leveraged long orders were liquidated on June 25 on the Binance perps market. But after hitting the potential bottom at the $7.20 area, only 120,000 LINK was cleared.
Can Bullish Signals Fuel a Price Reversal in LINK?
As price action has started to hint at a potential bullish reversal, on-chain metrics are also starting to align.
For example, Chainlink Spot ETFs turned positive again after recording their first daily outflow of $490,000 on June 22. This was after $138,000 flowed into ETFs the next day, providing relief to the bulls.
LINK ETFs are among the best-performing altcoin ETFs, but now only Spot Avalanche ETF (AVAX) has yet to see an outflow since its debut.
More importantly, demand for LINK is high and the supply is at a new high. In the month of June, the Chainlink reserve accumulated 593,088 LINK worth over $4.60 million. Total holdings stand at 4,504,167 LINK, helping to create a supply crisis.
Overall, these bullish signals could help the altcoin experience a bullish reversal. However, LINK needs to hold above the $7.20 area.
Final summary
- Chainlink signals a potential bullish reversal as the bears lose momentum, but the price must remain above $7.20.
- LINK ETFs turned positive again after their first outing since their debut, while the Chainlink reserve increased by $4.60 million this month.
