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Look Out Below: How Far Can The Chainlink (LINK) Crash Go?

Tony "The Bull" Severino
Tony "The Bull" Severino
4 years ago
3 mins read

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Chainlink’s bullish momentum hit a brick wall at $20 per LINK token, causing the previously unstoppable asset tumbling by as much as 25% in two days. After over 5,000% returns over the last two years, profit-taking may have only just begun. Now that Chainlink has started to fall, how deep can the correction go?

25% Crash In 48 Hours: Is The Unstoppable Chainlink Rally Coming To An End?

The cryptocurrency market hasn’t been the same since Chainlink entered the game. The altcoin went from relatively unknown, to nearly unseating Ripple from the top three ranked assets alongside Bitcoin and Ethereum.

As hot as the decentralized finance trend is today, the decentralized oracle’s uptrend has been one for the record books. Over the last two years alone, the asset is up well over 5,000%.

Related Reading | Bitcoin Dominance Readies Deadly Blow Against Altcoins, Indicator Says

Stories of early investors retiring from the unstoppable rally are common. But as crypto investors have learned the hard way in the past, what goes up, must eventually come down.

Assets don’t move up in a straight line forever, although Chainlink has done its best attempt to put that theory to rest. After recently breaking through its former all-time high in early July, Chainklink went into full price discovery mode, reaching as high as $20 per token at its peak.

The parabolic rally from July 1 to the local top, brought investors as much as 340% ROI. But with such substantial returns and a correction starting, profit-taking could pick up in severity with so many investors sitting in profit.

But how deep can the Chainlink correction go?

chainlink linkusd linkbtc indicaors

LINKUSD Weekly Technical Analysis Indicators: Parabola, Wedge, S/R Levels | Source: TradingView

Bearish Signals Call For Deep LINKUSD Correction, Or Will Bulls Push On Higher?

After taking off from $4, Chainlink rarely returned to retest resistance as support. With the parabolic curve (blue) almost fully breached and very little remaining runway, signs are starting to point downward for LINKUSD.

In addition to the parabola breaking, an ascending wedge pattern has potentially formed on weekly timeframes, pictured in the red dotted lines.

The two immediate weekly support levels lie at roughly $7 where Chainlink paused momentarily before taking another run, and at $4 where the parabola kicked into extreme gear.

Related Reading | Easy Money? Coinbase Crypto Coins Grow Over 50% On Average In August

While $4 may seem like a severe and overly bearish target for Chainlink, the asset topped $20 and could fall to $4. Bitcoin’s parabola breaking from $20,000 resulted in a fall to $3,200 when it was all said and done, further than what’s estimated for Chainlink’s correction.

Data doesn’t lie, and while Chainlink’s story certainly has been different over the last two years, even experienced chartists like Peter Brandt regularly call for 80% or more for a drop after a parabolic advance ends.

chainlink linkusd linkbtc indicaors

LINKUSD Weekly Technical Analysis Indicators: TD, Bollinger Bands, ADX, RSI | Source: TradingView

Technical analysis indicators also clearly demonstrated just how overheated and much overdue LINKUSD is for a correction.

The TD Sequential indicator is on a 13 sell setup, indicating extreme trend exhaustion on weekly timeframes. There’s also a massive bearish divergence across over a year of price action on the Relative Strength Index.

The Average Directional Index shows an extreme high trend strength reading, however, this can also signal a reversal is near, or underway. The ADX also shows the green Directional Movement Index line crossing through the ADX indicator itself.

The last time this crossover happened, a deep, 66% drop took place. Another 66% drop would take LINKUSD to the first listed target at roughly $7, while the full 80% drop would hit closer to $4.

Lastly, Chainlink weekly candles are working on closing back inside the Bollinger Bands after a breakout and close above. In other instances, it resulted in a sharp drop.

Did some quick analysis of #chainlink's network growth rate and historical deviations in price put $LINK at $32 by end of year, but that price would not be sustainable. Investors who buy at high levels risk losing 50% of their investment or more. Most growth priced in already.

— Timothy Peterson, CFA CAIA (@nsquaredcrypto) August 9, 2020

Signs are stacking across multiple timeframes against Chainlink rising further – for now. A correction at this point could be healthy, helping it reach targets of $32 by the end of the year as some analysts predict. Or like it has done in the past, it could continue to defy all odds and sell signals, and keep on setting new highs.

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Tony "The Bull" Severino
Tony "The Bull" Severino

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Read more

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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