Chainlink Resistance Archives

On-Chain Data Suggests Resistance Is Thin At Higher Chainlink Levels

As pointed out by analyst Ali in a new post on X, Chainlink is currently in a critical on-chain demand zone. In on-chain analysis, a price range is defined as major support or resistance based on the number of investors or addresses that bought their coins inside the said range.

To any holder, their cost basis is naturally fundamental, as their profit/loss situation can flip whenever the cryptocurrency retests it. For this reason, an investor becomes more likely to show a move whenever such a retest takes place.

If the holder had earlier been holding a loss, but the price has now risen and reached its equilibrium point, they might lean towards selling. This is because they might fear their holdings would go into loss again shortly, so exiting at break-even wouldn’t sound like a bad idea.

The opposite can be true when the retest occurs from above: the investor might be willing to buy more, thinking that if this same cost basis proved profitable earlier, it would do so again soon.

A single investor making such buy or sell moves is insignificant for the rest of the market, but if many investors share the same cost basis, the asset could feel a sizeable reaction when the price retests the level.

Now, here is a chart that shows how the Chainlink ranges around the current price look in terms of the density of investors who bought inside them:

As displayed in the above graph, the Chainlink levels from $13.8 to $14.2 host the cost basis of about 11,470 addresses, which acquired 23.45 million LINK inside this range.

This range is notably thicker than any other range immediately below or above the asset’s current price. LINK has been floating around this range recently, meaning it has been retesting this major support zone.

From the chart, it’s apparent that the ranges above don’t contain that many investors, so in theory, a move toward the higher levels shouldn’t be too hard for the asset.

However, the trouble would be if this support area is lost and LINK slips under it for an extended duration. This dense zone will turn into a resistance wall if this happens, making it hard for the cryptocurrency to recover above it.

Ali notes, though, that if Chainlink can remain above this zone, the price could climb towards new highs for the year 2023.

On-chain data shows there is major resistance ahead for Chainlink, a sign that could be troubling for the rally’s sustainability.

Only 55% Of Chainlink Investors Are In Profit So Far

As explained by an analyst in a post on X, Chainlink is still behind Bitcoin in terms of investor profitability despite the LINK price outperforming BTC in the year so far.

The below chart shows what the LINK address concentration looks like on the different price ranges that the asset has previously visited:

Chainlink Cost Basis

Here, the size of the dot represents the number of investors or addresses who purchased their coins inside the particular price range. It would appear that the ranges below $10 are host to the cost basis of a hefty number of holders.

Since the LINK price is above these levels right now, these investors would naturally be in a state of profit. These addresses only make for about 55% of the network total, however, implying that a significant number of them are still sitting at a loss. From the chart, it’s visible that the $16 to $27 range in particular has a considerable density of investors.

In on-chain analysis, major support and resistance levels are defined on the basis of the number of investors that are at a particular range. This is because of the fact that whenever the spot price interacts with the cost basis of an investor, they become more likely to show a move.

When the price retests the cost basis from above, the holder may decide to buy more. The reason behind this is that they might tend to believe that the level, which had been profitable for them earlier, might produce gains in the future again, so it would appear like an ideal point of accumulation for them.

On the other hand, the red holders might see the break-even point as a decent exit point, as they might fear that the cryptocurrency would go back down in the near future, so going out here at least means they can avoid taking any losses.

Such buying or selling from just a few investors when the price retests their common cost basis doesn’t produce any effects on the macro scale, but if a large number of investors bought at the same level, the reaction might be more pronounced.

Thus, the Chainlink levels ahead until the $27 mark might prove to be a source of some heavy resistance, making the rally hard to sustain through them.

The analyst notes, however, “once LINK breaks the $27 mark, the ensuing rally is expected to be substantial. Alongside this, the wallet profitability ratio is projected to surpass 80%.”

As mentioned before, Bitcoin’s investor profitability distribution is looking much better so far, as the below chart from IntoTheBlock shows:

Bitcoin Cost Basis

Bitcoin is currently battling against the resistance offered by the current investor-packed $34,100 to $35,100 range. Once BTC is through these levels, however, the road towards $40,000 might prove to be relatively easy.