Chainlink has registered some drawdown and has recently retested the $14 level. Here’s what might happen if support holds at this mark.
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:
Looks like the ranges above are relatively thin with investors at the moment | Source: @ali_charts on X
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.
LINK Price
Chainlink had slipped below this range just earlier, but the asset was quick to recover above it, implying that it’s still holding up as support.
The asset has seen a pullback recently | Source: LINKUSD on TradingView