Chainlink (LINK) On-Chain Trading Signals

Chainlink is a blockchain oracle governed by its token with the same name (LINK). Blockchain oracles provide data to smart contracts from outside of the blockchain and are a vital foundation of the decentralized finance (DeFi) ecosystem. Like most cryptocurrencies, LINK is volatile and sees rapid swings in price. While many long-term holders believe in Chainlink’s promise of uploading the world's data to the blockchain, many traders are looking to profit from these price swings.

A beneficial practice used by traders is understanding trading signals. One advantage of crypto is that the data is transparent on-chain. While you can go straight to the source, you can also use websites and technologies that help sort the data for you and make it digestible.

One of the best resources for Chainlink trading signals is IntoTheBlock. Here is a deep dive into the on-chain trading signals with this website below.

Chainlink On-Chain Trading Signals Analysis

Holders Making Money at Current Prices

This is one of the more useful Chainlink trading signals. It displays the percentage of LINK holders that are in the black (positive) on their trade. From the data above, you see that far more holders are in the red (negative) since their purchase of LINK. This signal often means that investors are still holding despite the token's steep price drop. While it is experiencing bearish pressure, fewer holders can take profits. One individual signal is usually not enough to base a trading decision on.

Concentration by Large Holders

This trading signal addresses the total holding by whales and large holders. A whale is classified as a holder who owns more than 1% of the circulating supply of a token; a large holder owns more than 0.1%. The data from the block shows that well over half of the LINK tokens are held by whales or large holders. This metric is not unusual for a project like this because typically a core group of team members, advisors and early investors get a large supply of the tokens at launch. However, traders may be concerned when holdings are too centralized because it goes against the ethos of crypto. It can be a risk for traders since whales can dump their holdings, in turn rapidly crashing the price of a token.

Price Correlation With Bitcoin

This section displays how correlated the price movement is to Bitcoin over the last 30 days. Most cryptocurrencies are highly correlated to Bitcoin and closely follow its movement. A key difference is that altcoins like LINK are typically even more volatile. 

Holder’s Composition by Time Held

Holder’s composition by time held shows the average length that the token is held by its investors. You can see that in LINK’s situation the majority of holders have held the token for a year or more. Longer-term holds are typically a bullish indicator, especially for longer-term investors. The price of a token ultimately comes down to supply and demand, and if a large amount of the supply is indicating it will not sell, then the price could very well go up. This metric is not the only aspect to look into and could shift drastically if whales begin to dump. Also, while 1+ years feels like a long hold in crypto terms, in the grand scheme of trading it is a short time to be holding an asset.

Transactions Greater Than $100,000

This Chainlink trading signal displays the total amount traded in transactions over $100,000 in the past week. It can be both bullish or bearish, but a token is more likely to see low volatility and is often less promising if there are few large transactions.

Transaction Demographics

This metric explains whether trades are taking place in eastern time zones or western time zones. Understanding what demographic is trading certain currencies can be helpful in creating a thesis around the coin. Eastern and western time zones are just the tip of the iceberg if you are looking to get more in-depth for this category. 

Exchange Inflows and Outflows

The exchange inflows and outflows trading signal describes tokens leaving exchange wallets compared to entering exchange wallets. Centralized exchanges are basically the only way to sell cryptos for fiat currency (USD, EUR, GBP). When investors are sending their cryptos into an exchange, this likely means they are getting ready to sell them. When they withdraw them to a personal wallet from an exchange, this usually indicates they want to hold them. The data measures these flows over the past week, which can be one of the most important trading signals to understand the sentiment of traders holding LINK.

Is Now a Good Time to Buy Chainlink?

With the crypto market trending in bear territory, it is difficult to make any sort of short-term trades that are profitable. The data shows mixed signals and investors are largely freeing up some cash and getting liquid. However, Chainlink shows some bullish signals for long-term holders, with great technology and a large percentage of LINK owners holding for over a year.

How to Buy Chainlink?

Chainlink is an ERC-20 token on Ethereum and is offered on most crypto trading platforms. Popular exchanges like eToro, Binance.US and Crypto.com offer the LINK token. If you are looking to get more into the technical use of LINK, it could be a good idea to get a non-custodial wallet and purchase through a decentralized exchange such as Uniswap.

How Does Chainlink Fit Into the Bigger Picture?

Streaming data to the blockchain is going to be a need in the long term. By uploading real-world data to the blockchain, it can be further authenticated and used among different decentralized applications. The Chainlink network integrates off-chain data to the blockchain, allowing for complex smart contracts to operate through a decentralized oracle network. However, it has competitors, such as optimistic oracles, which Universal Market Access (UMA) —  a DeFi protocol that cuts out the centralized brokerage firm and allows users to trade contracts similar to futures and options by using smart contracts —  is currently working on.