LINK is up to 100% in a month: what is behind an intense rally?
Last year, LINK, the Chainlink coin, went up 600%. Since the beginning of 2020, the coin has already grown by 100%, recovering just a month after the March market collapse, and maintains an uptrend, outstripping the growth rate of MTC and other altcoins. We have figured out the reasons for the rapid growth of LINK quotes this year.
LINK — one of the most profitable crypto assets over the past year and a half
Chainlink (LINK) is a decentralized oracle service coin built on the basis of the Ethereum blockchain. Since blockchains do not have access to data outside their network, they need special programs — oracles, which act as a third-party source of information for smart contracts. Chainlink technology helps connect smart contracts to external resources across networks using the API. This is becoming more and more popular in the market, and therefore more attention to the project.
In September 2017, the project raised $32 million during the ICO. Then the price of LINK was $0.19. For three and a half years, the coin has risen in price 20 times — up to $3.50. At the time of the publication of the article, Chainlink’s capitalization is $1.224 billion — the 12th place among all crypto projects on the market.
2018 was a year of both falling and rising prices for Chainlink coins. Having risen in price to $1.38 by the beginning of January, the asset moved into a downtrend, briefly replaced by small rises. Already in the summer of the year before last, LINK cost about $0.2.
However, 2019 was a triumph for the project — interest in the protocol has grown significantly. Throughout the year, the company entered into dozens of integrations of its oracle-solution framework with a wide variety of organizations: crypto start-ups, large companies, data providers, node operators, ecosystem creators, and others.
One of the main factors of LINK growth was the partnership with Google, concluded in June last year. The Google Cloud team has developed a way to create “hybrid blockchain/cloud applications” using Ethereum. After the news, the asset immediately went up by 50%. In the fall, the rate grew amid news of cooperation with the SWIFT payment system.
So, in the first half of last year, LINK was on the rise, having risen in price from $0.30 in January to $4.18 in June. The coin was stormy in the second half of the year: the asset ended the year at the peak of decline and cost $1.82. Nevertheless, LINK grew by 600% per annum — one of the best indicators of last year.
From the beginning of 2020, the coin went up from $1.82 to $4.90 in early March, fell to $1.74 in mid-March and then began to grow again, reaching $3.50 at the time of publication. Thus, LINK’s profitability since the beginning of the year amounted to more than 100%, having overtaken even VTS and ETN in this indicator. In just over a month, the price again rose to levels preceding the March fall, which shows interest from buyers.
At the same time, in mid-March, on some exchanges, LINK fell to almost zero. The rapid recovery of the coin in just a month led a number of users to think that we were dealing with a dump. However, other factors besides artificial factors are sufficient for LINK growth. We will understand them.
Active project community
LINK was lucky with the community — the coin has a strong “fan base”, constantly
promoting or selling its favorite project. This, of course, has a positive effect on the price of a coin. A strong, active community is always a good indicator of positive market trends.
According to The Block, the number of new Chainlink users is growing at an average of 1,500 new addresses per day.
In total, the number of network users has grown since the beginning of the year from 82,000 to 125,000. Chainlink network continued to grow, despite the financial chaos caused by the ongoing coronavirus pandemic and the fall of the cryptocurrency market in March this year.
Moreover, the number of addresses that held the coin from one to twelve months is also growing steadily.
The volume of daily trading has increased several times compared to last year and almost 10 times since the beginning of the year.
As you can see, the coin has good indicators of investor confidence in the project. Brian Quinlivan, director of marketing and social media at Santiment, believes network growth is one of the most accurate predictors of coin growth. He believes that network growth usually leads to higher prices, while a decrease in network growth in most cases indicates a drop in value.
New Chainlink Partnerships
Large companies also believe in Chainlink. We note a few key agreements this year.
In late March, Fantom, an open registry company, announced the integration of Chainlink as its official oracle solution and pricing mechanism for the FTM token. The immediate focus of integration is to create scalable DeFi products to support the Fantom financial system: decentralized stablecoins, credit protocols, and decentralized applications. The company notes that Chainlink “stands out in terms of safety, reliability, and accuracy.” In the future, both startups hope to expand their use of DeFi. Companies are confident that the synergy of Chainlink and Fantom technologies will provide developers with tools to take DeFi to the next level.
In early March, Chainlink announced that it was part of the technical steering committee of The Baseline Protocol, an Ethereum protocol for the corporate sector, launched by EY startup in conjunction with Microsoft and ConsenSys. The product consists of procurement tools, business processes, supports smart contracts, and tokenization. It should enable various companies to use the Ethereum and DeFi ecosystem for complex corporate processes without storing confidential data in a public blockchain.
On April 6, the Cypherium blockchain platform also announced integration with Chainlink. Sky Guo’s CEO said that “uncompromising in security matters, Chainlink is the perfect technology for Cypherium.”
On April 18, demand for LINK went up after US venture capital firm ParaFi Capital, which supports the popular DeFi MakerDAO platform, proposed providing DAI stablecoin with LINK. The company noted that Chainlink has “an attractive market capitalization, liquidity profile and appetite for speculation”, which may help DAI maintain its pegging to the US dollar. Among the other advantages of the coin were mentioned decentralization, the “kill-switch” functions (emergency disconnection from the Internet when the connection with the VPN server was disconnected) and “blacklisting” (compilation of the “blacklist”).
Mid-April growth came amid Gemini’s listing LINK. At the same time, Tyler Winklevoss, co-founder of Gemini, spoke positively about the asset, the development of the project and the community of its investors.
Chainlink becomes an important part of the DeFi industry
Chainlink Oracle solutions use such credit platforms as bZx, Aave, Celsuis Network, Synthetix, Loopring, Ampleforth, Polkadot.
DeFi companies turned to Chainlink after the February attacks on bZx, when a hacker took advantage of the protocol vulnerability twice, tricked the oracle and withdrew nearly $1 million. Then the attacker was able to manipulate asset prices and withdraw funds, because the platform used the Kyber network as a single oracle.
Chainlink uses a decentralized oracle network. In this case, the hacker cannot repeat the attack similar to the case with bZx — manipulations with one oracle will not have a significant impact on the final result of the transaction. The decentralized Oracle Chainlink network can significantly expand the functionality of DeFi smart contracts, increase the variety of products offered and make the market more attractive for regulated players.
“If in 2017, investors bought up any altcoins, hoping that at least some would be fired, now they prefer only those projects that have a distinct niche in the market. LINK is one of the obvious favorites: oracles are in demand in the work of smart contracts, their popularity is constantly growing. Many startups on smart contracts, for example, prediction markets, have their own oracle systems, but even they prefer to use third-party trusted services for tasks. Hence LINK’s excellent chances of success”, said Victor Argonov, an analyst at EXANTE.
Sergey Zhdanov, CEO of EXMO, said: “The main advantage of Chainlink is that the company has occupied a niche that has been addressed by relatively few large projects. At the same time, it offers a decentralized network of oracles. And high-profile partnerships gave them additional credibility in the industry. Given that the company continues to actively enter into new partnerships, by the end of 2020, we must assume that the number of partners can go far ahead. Thus, it is gradually becoming a kind of monopoly on a specific solution for blockchain projects. And the need for DeFi-projects that has become aggravated this year to increase the level of security by increasing the number of oracles only increases the role of Chainlink in the cryptocurrency sector. At the same time, due to a large number of partners, Chainlink is gaining extensive experience, gaining additional fuel for the growth of the project.”
Bullish trend of the coin may turn bearish
Chainlink is a promising but risky asset. Throughout the year, LINK was characterized by a high level of volatility. The current trend of rising costs signals the willingness of traders to keep prices afloat above critical support levels.
After the influence of the news on MakerDAO collateral and new Chainlink partnerships subsides, investors can begin to unload their positions in LINK, switching to MTC or Fiat, primarily the dollar. The coronavirus pandemic has boosted demand for the US dollar among institutional and retail investors. While it drags on, the majority will be calmer with it.
However, despite the ongoing bullish trend, technical indices and the general market situation, coupled with the uncertainty due to the pandemic, show that the coin may soon go through another bearish momentum before continuing the uptrend. But there are no fundamental reasons for the prolonged depreciation: the project is actively developing and is interesting for investors.
Sergey Zhdanov noted that while LINK’s prospects look very positive. “An important role is played by the fact that the project is preparing to switch to its own blockchain network while using the Proof-of-Stake consensus algorithm. Chainlink is one of the 15 most anticipated networks with support for staking. Given LINK’s high growth rates over the past year and its presence on many of the largest cryptocurrency exchanges, it seems very likely today that the organization will enter the top ten most popular projects for holding funds in staking.”
“Now LINK rises in price and shows independent dynamics against the background of the general market movement. A well-chosen niche plays into the hands of the project, as well as the prospects for collaboration with major players.
In particular, the company is establishing cooperation with Google and Swift. Nevertheless, as the company grows, it may face new challenges: difficulties in scaling, the concentration of capital in a small number of individuals, and potential legal problems. It is worth noting that not a single blockchain is insured against such difficulties, and a lot depends on how successfully the company’s management can cope with them”, said Victor Argonov.