Chainlink: Do ETF inflows and reserve growth hint at LINK’s recovery?

Chainlink [LINK] is among the top blockchains that are being utilized in tokenization and borderless money transfers. However, LINK has fallen about 4% in the past 24 hours with price trading below the 200-day MA.

However, LINK’s price weakness seems to be coming to an end, at least in the short term. Here is why Chainlink may be about to see a bullish reversal.

Sellers lose steam as LINK rejects support for the third time

LINK’s price broke below an ascending trend channel in late May. This movement coincided with the broader crypto market that has been weak since late last year, though activity continues to thrive.

Following the breakdown, sellers pushed the altcoin to February’s low of $7.265 but faced a small rejection. The rebound fueled the price past $8 but has since retraced to this support level, and it appears to be holding.

This is the third touch of the $7.20 support, and from the look of things, sellers are losing steam. For instance, the momentum indicator is declining and has flipped negative.

More analysis on a smaller timeframe shows that indeed sellers are getting exhausted. The four-hour candles are consolidating around $7.280 with MACD bars becoming faint. That means sellers are getting exhausted.

However, LINK price has bounced off the 0.618 Fibonacci retracement level, indicating the ongoing drop might be strong in hindsight. But for a downtrend continuation, it depends on LINK breaking below the $7.20 zone.

Moreover, aggregate liquidations have greatly reduced. This is an indication that volatility has also reduced, a signal that precedes expansion.

For instance, over 1 million LINK in leveraged long orders were liquidated on June 25 on Binance’s perps market. But upon forming the potential bottom at the $7.20 zone, only 120K LINK have been wiped out.

Can bullish signals fuel a price reversal in LINK?

While the price action has started to hint at a potential bullish reversal, on-chain metrics are starting to align too.

For instance, Chainlink Spot ETFs turned positive again after recording their first daily outflow of $490K on the 22nd of June. This was after $138K flowed into the ETFs the next day, relieving bulls.

LINK ETFs have been among the best-performing altcoin ETFs, but now only Avalanche [AVAX] Spot ETFs are yet to see outflows since their debut.

More importantly, LINK demand is high with the reserve hitting a new peak. In the month of June, the Chainlink Reserve has accumulated 593,088 LINK for over $4.60 million. The total holding stands at 4,504,167 LINK, helping in creating a supply crunch.

Altogether, these bullish signals may help the altcoin see a bullish reversal. However, LINK has to hold above the $7.20 zone.

Final Summary

• Chainlink signals a potential bullish reversal as bears lose momentum, but the price needs to stay above $7.20. 
• LINK ETFs turned positive again after their first outflow since debut while Chainlink Reserve grew by $4.60M this month.