Chainlink Could See Price Drop After Changes in Exchange Reserve

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  • Chainlink (LINK) is down by 22%, exchanging hands at $6.95.
  • LINK’s exchange reserve is dropping, hinting at a possible price crash.
  • A similar scenario happened before, but there is still no clear path for LINK investors.

As the month of August nears its last day, Chainlink (LINK) continues to go on a downward trend, down by 22% in the past two weeks.

According to the estimates of CoinMarketCap, LINK managed to reach a month high of more than $9 on August 12, 2022. However, a bearish performance in mid-August started a downward spiral for LINK. With the price now hovering between $6 and $8, LINK is back to a familiar range in June and July.

At the time of writing, LINK exchanges hands at $6.95, down by more than 5% in the past 24 hours. Its price is now down by almost 87% from its all-time high of $52.70 over a year ago. The cryptocurrency has also weakened today against the two largest cryptocurrencies by market capitalization, Bitcoin and Ethereum, falling by 3.75% and 1.9%, respectively.

Meanwhile, LINK’s exchange reserves dropped by a significant amount in the last two months. From a six-month peak at 108.9 million, the cryptocurrency’s exchange reserves have fallen to 95.7 million yesterday. This suggests that the exchange reserves are within the same range as their latest six-month lows.

Source: (CryptoQuant)

An exchange reserve is a collective measure of potential coins that are ready to be sold in the cryptocurrency market. To note, changes in exchange reserves affect a cryptocurrency’s demand characteristics. The lowers the amount in exchanges, the higher the demand becomes. Hence, more supply outflows should spell trouble and cause a supply shock.

The last time LINK’s exchange reserves dipped to their current levels, a price crash happened. However, there are several differences between the last and current scenarios.

For instance, the current price movement looks synchronous with the exchange reserve. On the other hand, the last exchange reserve low was marked by a price divergence.

Moreover, yesterday’s LINK price was at a $10 discount versus the price before. However, it is still glaring how LINK’s supply on exchanges continue to dwindle in the past month.

While the current scenario is showing signs of contrast between the time LINK crashed amid plummeting exchange reserves, there is still no clear path for LINK investors. However, the amount of LINK supply in exchanges could drastically affect the cryptocurrency’s volatility.

Disclaimer: The views and opinions, as well as all the information shared in this price analysis, are published in good faith. Readers must do their own research and due diligence. Any action taken by the reader is strictly at their own risk. Coin Edition and its affiliates will not be held liable for any direct or indirect damage or loss.