Chainlink [LINK] drops to crucial support zone: Is a price reversal likely?
Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion.
- LINK dropped to a key demand zone.
- LINK monthly holders’ profits tanked.
Chainlink [LINK] saw a short-term devaluation on 30 January, but a recovery could be likely. LINK plunged by 10%, dropping from $7.518 to $6.748. The drop followed Bitcoin’s [BTC] price action after the king coin lost hold of the $23k zone – setting most of the altcoins into short-term price correction.
Read Chainlink’s [LINK] Price Prediction 2023-24
At press time, LINK’s value was $6.925 and flashed green after hitting a key support zone.
The support zone of $6.754 – $6.883: Can bulls prevail?
The range level of $6.754 – $6.883 (green) was a key resistance zone before being flipped into a support area. It blocked LINK’s rally around mid-January and became a selling pressure zone, pushing LINK to new support at $6.329.
But a bearish breaker on 20 January flipped the level to support. Since then, the level has been retested twice and breached once as support. Therefore, it has proven to be a key demand zone that could boost bulls’ recovery efforts.
As such, it could help bulls launch a recovery targeting the new selling pressure zone (red) at $0.7500. In addition, a retest of the December high of $7.681 could be possible if BTC reclaims the $23.5k level and surges afterwards.
However, a breach below the support zone will invalidate the above bullish bias. But the drop could be contained by $6.606 or $6.329 levels.
The On Balance Volume (OBV) has increased since mid-January, showing an increasing demand for the asset. LINK’s RSI value was 50; thus, it was in a neutral structure at press time. So, any extra surge in demand could help bulls to sustain the price recovery.
Chainlink monthly holders’ profit declined, but trading volume increased
As per Santiment data, LINK’s sharp price decline saw a massive drop in monthly holders’ profit, as evidenced by the neutral 30-day MVRV (Market Value to Realized Value) ratio. It means monthly holders’ profits had declined to zero. But a price recovery could help recover the losses.
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Despite the profit decline, weighted sentiment remained positive, indicating that investors were bullish on the asset. In addition, there was an uptick in trading volumes, as indicated by a surge in daily active addresses. Therefore, a price reversal could be likely, and the support zone could hold strong for the bulls’ recovery.
However, the FOMC meeting could unsettle bulls if it adopts a hawkish stance. Therefore, investors and traders should track FOMC announcements and BTC’s price action.