Chainlink price has entered a concerning pattern that signals a potential 35% crash ahead. An analysis of the 4-hour chart reveals a head and shoulders pattern, which has become a notorious indicator for traders watching LINK’s movements. This pattern indicates that the price has dropped to the neckline, aligning with the 50% retracement level and raises alarms for investors.
Despite Chainlink’s strong fundamentals, the price has experienced a staggering decline this month, plummeting 35% from its December highs. This decline mirrors the struggles faced by other cryptocurrencies, including Bitcoin and various altcoins. The price previously rallied, reaching $31 in December as the broader market surged. However, current trends suggest a further downturn.
The head and shoulders pattern consists of three peaks: a central head and two shoulders on either side. For Chainlink, the head formed at $31 while the shoulders hovered around the 23.6% Fibonacci Retracement level of $26.10. The pattern’s neckline is at the 50% retracement point, and combined with additional indicators like the death cross, which occurred on December 22, there’s a forecast of downward movement.
A death cross occurs when the 200-period weighted moving average crosses below the 50-period weighted moving average, indicating bearish momentum. Compounding this, the Percentage Price Oscillator (PPO) has also dipped below the zero line, further supporting the bearish sentiment. With a significant distance between the head and the neckline, projections show that a drop to $13.25 could be possible in the coming days.
On a broader scale, the total value secured in the Chainlink ecosystem has also declined, from a peak of $41 billion to about $35 billion recently. This decline is consistent with the trends seen in other DeFi tokens like AAVE and Uniswap, which have shed assets as well.
Moreover, there’s noticeable weakness in the Chainlink futures market. Recent data by IntoTheBlock highlights a drop in open interest from $2.8 billion to $1.48 billion over the past two weeks, indicating diminished demand among traders.
For those wondering why Chainlink has taken such a hit, it’s largely tied to its correlation with Bitcoin and the profit-taking behavior of investors during LINK’s recent ascent. With the existence of a potentially bearish head and shoulders pattern and the death cross, caution is recommended for those considering an investment in Chainlink at this time.
In conclusion, while Chainlink may have a solid foundation, current charts and technical indicators forecast more pain before any potential relief. Investors should stay informed and vigilant as these dynamics unfold.
