Key Insights:
- Chainlink is testing $12.25 support, a key Fibonacci level.
- Bearish sentiment from both retail and institutional investors.
- A failure to hold $12.25 could lead to further declines toward $10.
Chainlink (LINK) price is testing a key support level at $12.25, a key Fibonacci retracement point that has been a significant area of interest for traders. Open interest and network activity have lately declined, showing reduced market activity.
Chainlink (LINK) price is consolidating near $12.25, a level that aligns with the 50% Fibonacci retracement from its cycle low to the recent $27 high. Despite the technical support, both network activity and open interest have dropped, and sentiment remains cautious across the board.
Chainlink Price Retest of the Breakdown Zone
The market now watches whether LINK can maintain this support or break lower, potentially retesting $10 or even $7.50.
Fibonacci retracement levels are critical in identifying potential levels of support or resistance, and this particular 50% level is an area where LINK traders have historically placed interest.
However, if LINK does not maintain above the $12.25 support zone, it may get further upside, with the next possible support levels keeping an eye at $10 and $7.50, respectively. The deeper retracement zones show that the $12.25 critical area is where any additional price weakness could come in.
The LINK is yet in the long-term bullish phase as per the ascending trendline from 2024. Yet, as this is a pullback, it may signify temporary consolidation before a possible continuation of the uptrend or even a deeper correction.
Sentiment and Market Indicators Reflect Caution
Market sentiment analysis suggests Chainlink has a bearish sentiment for retail and institutional investors. On the crowd sentiment, LINK is at -1.06, indicating that the retail investors are mostly bearish on LINK’s short term price action.
Moreover, the smart money sentiment indicator, which monitors institutional traders’ sentiment, is shown at -1.13, which is slightly negative. This suggests that institutional traders are still fearful of LINK’s direction in the near future.
Since retail and institutional traders do not have a positive sentiment in the market, many would have to be cautious and wait for a more precise direction.
Declining Network Activity and Open Interest Suggest Market Consolidation
Another critical factor is the correlation between Chainlink price and daily active addresses. The chart shows that the number of daily active addresses has decreased as the price of LINK falls from its previous highs. The yellow bars for daily active addresses are necessary signals to reduce network activity that could contribute to LINK’s bearish price action.
In addition, LINK open interest has decreased by 3.18%, suggesting that the market is experiencing a temporary pullback or consolidation. The reduction in open interest could reflect a decrease in market activity, with fewer traders willing to take large positions in LINK.
Potential for Bullish Reversal: The Falling Wedge Pattern
With a bearish sentiment and a thin market, LINK’s daily trading chart has shown a bullish reversal pattern in the form of a falling wedge pattern. A breakout is expected after the upper trend line is broken. If the breakout occurs, this pattern will likely push LINK upwards towards the $23–$24 range.
The Relative Strength Index (RSI) is at 47.78, signaling a neutral market, neither overbought nor oversold. This indicates that it may surge or dip as the direction remains unclear. The MACD line is slightly above the signal line, indicating a bullish market but weakening momentum.
Meanwhile, Cumulative Volume Delta (CVD) gives a positive value of 321.75K, meaning that buying pressure is increasing, outperforming the bears.
The chart also reveals some selling pressure near the upper trendline of the wedge, which suggests that LINK may face resistance before any potential upward breakout.
Disclaimer
This article is for informational purposes only and does not provide any financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
Olivia Stephanie is a FinTech enthusiast with a keen understanding of financial markets. Her passion for economics and finance has led her to explore emerging blockchain technology and cryptocurrency markets.