Cryptocurrencies are enjoying a bit of a purple patch of late, helped by Bitcoin’s advance above key areas on its chart. As a result, a data provider to smart contract applications, Chainlink, has grown by double digits over the past week amid a period of high network activity.
Active Addresses – Boon & Bane
Parallels can be drawn between the recent volatility in the Chainlink market and its active addresses. More specifically, analytics platform Santiment argued that LINK’s price tends to rise when its active address count rises above 200 and declines once the active address count slips below 120.
With that in mind, the current reading is not ideal for a new Chainlink high. LINK’s active addresses have declined drastically since 16 March and are hovering around levels seen in February.
Last month, a systematic fall in those sending or receiving LINK tokens combined with a Bitcoin correction led to a 34% downturn in LINK’s value. The altcoin hit over a 1-year low on 24 February after a candlewick extended as low as $11.4.
Hype Trading Absent
At times, hype trading can create short-term value for an altcoin but Chainlink did not particularly have a reliable fallback option. Social media activity compiler LunarCrush showed that Chainlink’s weekly social dominance and social engagement were down by 44%, and 9%, with users circulating LINK’s peers on social media platforms.
Chainlink Daily Chart
The abovementioned data certainly leaves Chainlink in a precarious position on the chart. The price is testing the upper trendline of an ascending channel and a breakout above $16 can bring in more gains.
The primary indicators – RSI and MACD are yet to fully approach bull areas and a breakout is not a certainty. On the contrary, a low active address reading, coupled with an uninspiring social score could come back to bite LINK. Those trading for a breakout would have to maintain caution and mitigate risks through maintaining a tight stop-loss.