The price of Chainlink has decreased by almost 3% today, leading to conjecture over the possible causes of the current decline. Even while the market as a whole and popular cryptocurrencies like Bitcoin, Ethereum, Cardano, and others have dropped today, it seems that other variables are at work that have caused the price of LINK to fluctuate.
Here, we investigate probable causes of the recent volatility in the price of LINK that go beyond market patterns.
Price Slips for Chainlink Through a Massive Token Unlock
Today’s decline in Chainlink’s price comes after a significant token unlock event. Notably, a recent study revealed that Chainlink had unlocked 21 million LINK tokens from supply contracts that were not in circulation for a total estimated value of $295 million.
Spot On Chain reports that a significant quantity of tokens have entered the market due to the unlock, which has sparked worries about an increase in supply and possible price effects. This trend can indicate that LINK’s price will drop much further shortly.
Token unlocks, on the other hand, typically expand a cryptocurrency’s quantity in circulation, which may drive down its price. The influx of new tokens can potentially dilute current holdings, lowering the value of each token.
Token burns tend to have a reverse impact by raising the value of the remaining tokens after reducing the total quantity.
During today’s unlock, 2.25 million LINK (worth $31.3 million) were sent to a Multisig wallet with the code 0xD50f, and 18.25 million LINK (worth $264 million) were transferred to Binance. This significant token movement has probably exacerbated the urge to sell LINK.
Furthermore, the research from Spot On Chain emphasizes that since August 2022, Chainlink has unlocked 127 million LINKs. Furthermore, 107.7 million of those tokens—at an average price of roughly $9.89 per LINK—were transferred to Binance.
Currently, 24 contracts totalling 391.5 million LINK, or $5.4 billion, are locked. Though LINK’s price has mostly been steady after unlocking despite these unlocks, the market’s reaction today raises new worries.
What Comes Next?
In addition to increasing the number of LINK tokens in circulation, the recent unlocking has caused investors and analysts to speculate extensively on Chainlink’s potential price trajectory. When there is a significant increase in the quantity of tokens available, investors usually feel more pressure to sell because they think the value may drop.
Even if the price drop of LINK today is consistent with general market trends, its effects are compounded by the timing of the token unlock. In the short term, any good market sentiments or technical advancements may be overshadowed by the increased supply resulting from the unlock, maintaining downward pressure on the price.
Although Chainlink’s price usually stabilizes after a previous token unlocks, the recent response from the market emphasizes how crucial it is to keep an eye on these developments. The cost of LINK was down 3.23% at the time of writing, trading at $13.80.
Furthermore, its trading volume increased by 22% to $320.884 million, and the cryptocurrency reached a high of $14.58 the previous day. Nevertheless, despite the recent decline, Chainlink’s Open Interest (OI) increased by 1.74% to $179.02 million.
