Is Now a Good Time to Buy Chainlink (LINK)?

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Contributor, Benzinga
July 5, 2022

Chainlink is a multi-chain ecosystem that is designed to connect blockchains with the real world. By nature, blockchains don’t have an effective way to access external data – it’s difficult to connect off-chain data with on-chain data when using smart contracts. 

Chainlink addresses this issue by providing a decentralized oracle service that can provide external data to smart contracts on Ethereum. In other words, Chainlink acts as a bridge between blockchain smart contracts and external data sources. As opposed to Bitcoin and Ethereum, Chainlink is not a monolithic network like a blockchain but rather a framework and infrastructure for building oracle networks that augment the capabilities of different blockchains and their respective Layer 2 protocols.

Created in 2017 and officially launched on mainnet in 2019, the Chainlink team has consistently been able to deliver on its vision, expanding efforts beyond Ethereum as the cryptocurrency market continues to grow. Because of the flexibility of its design, Chainlink can provide any type of data to any smart contract application on any blockchain network. 

The following article will discuss whether right now is a good time to buy Chainlink (LINK).

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Chainlink has been in a downward trend since its all-time high of $52.88 in May 2021, causing many retail investors to exit the market. Moreover, over the last few months, the cryptocurrency market has been rattled by negative events such as the Terra Ecosystem collapse, Celsius’ suspension of withdrawal/transfers and concerns of Three Arrow Capital becoming insolvent. These events exacerbated the bleak trajectory for Chainlink and the broader cryptocurrency market. In June 2022, Chainlink is trading for less than $7, down over 80% from its all-time high. However, Chainlink is not alone in its descent. Bitcoin tumbled to $18,000 in June 2022, marking the first time in history in which Bitcoin traded below the previous cycle’s all-time high.

Nonetheless, while some see a despairing and gloomy market, others see a magnificent opportunity. In hindsight, times of unprecedented fear and pessimism often turn out to be extraordinary opportunities to accumulate assets at fair prices. After all, a $6.50 LINK is a lot more attractive than a $53 LINK. As a result, if you are a believer in the long-term potential of Chainlink, right now could be a stellar time to start to scale into the market, albeit not without risk. 

How Long Will the Crypto Bear Market Last?

Bear markets refer to a period of time where trading volume is low, supply is greater than demand, prices are falling and fear is extremely high. However, in contrast to traditional markets, cryptocurrencies are small and therefore more volatile. As a result, it is common to see prolonged and more volatile bear markets where 80% price drops are not out of the ordinary. 

Having lasted for eight months and counting, the current bear market can be attributed to a variety of factors. Experts point to concerns over tighter monetary policy, the war in Ukraine and rising inflation rates as the primary catalysts for slumping prices for risk-on assets such as cryptocurrency. Moreover, the cryptomarket has been following the stock market in recent months, which makes it even more intertwined with macroeconomic factors. Nonetheless, based on previous bear markets such as the 2012 or 2018 bear markets, many crypto natives are expecting the current bear market to last until late 2022 or early 2023. 

When Chainlink reached an all-time high of roughly $53 in May 2021, Chainlink’s market capitalization reached a value equal to $22.7 billion. To return to a market cap of $22.7 billion sometime in the near future, Chainlink’s price would need to reach a value of $48.5. However, it is important to note that this price is subject to decrease in the future as Chainlink’s circulating supply steadily approaches the max supply of $1 billion LINK. 

In light of the current macroeconomic backdrop, it is unlikely that BTC will reach all-time highs any time soon. Investor confidence continues to dwindle as concern that the global economy may enter a recession continues to grow. Moreover, other risk-on assets such as stocks are also underperforming, ultimately suggesting the current bearish climate is being driven by factors far bigger than the cryptocurrency industry.

Chainlink could be a great investment choice for cryptocurrency investors wanting to diversify their cryptocurrency portfolio. Chainlink is a market leader in the decentralized oracle sector of the cryptocurrency market and has a strong value proposition. As the crypto space continues to integrate with the rest of the digital economy, the need for external data to integrate with smart contracts on the blockchain will continue to grow. Chainlink is well positioned to capture this growing demand if the team continues to execute. 

However, despite these fundamentals, Chainlink is still considered to be an extremely risky investment. Chainlink is inherently volatile, often fluctuating by large amounts within a short period of time. The extreme volatility results from prices that heavily rely on shared beliefs and market sentiment. Moreover, unlike Ethereum and Bitcoin, Chainlink is not a top 5 cryptocurrency by market capitalization and therefore presents more risk than other more established cryptocurrency projects.

High risk isn’t inherently bad or good for an investor. Risk works both ways, meaning that each investment into Chainlink carries the risk of significant failure and benefit of significant success. As an investor, you must evaluate your own risk tolerance investing in Chainlink and decide between a short-term strategy, long-term strategy or a combination of both.

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LINK can be traded on major exchanges such as Coinbase Global Inc. (NASDAQ: COIN), Gemini, Crypto.com and KuCoin. Many of these platforms allow you to purchase LINK using your credit card, through swapping features or through different trading pairs such as LINK/USDT. 

Chainlink can be stored using a hardware wallet or a software wallet. A hardware wallet is widely regarded as the most secure way to store crypto. It keeps your private keys offline so that your crypto is inaccessible to anyone but the holder of the private keys. Ledger wallet is a great choice for a hardware wallet – Ledger claims to provide the highest level of security for crypto assets.

Conversely, software wallets enable crypto holders to securely store their digital currencies and tokens in one place. These types of wallets allow users to buy, swap, lend and earn cryptocurrency in an efficient manner. The Coinbase Wallet is an example of a software wallet. 

As mentioned, Chainlink is a decentralized oracle network that enables smart contracts to securely interact with real-world services and data that exist outside of blockchain networks. Oracles refer to a piece of software that translates external data to a language that smart contracts can understand (and vice versa). Chainlink can connect APIs, internal systems or other types of external data feeds. LINK is an ERC-20 token and is used to pay for the oracle service on the network.

According to CoinMarketCap, Chainlink has 76% of the market share in the oracle sector of the cryptocurrency industry, followed by UMA and WINkLink, which possess 4% and 3% respectively. 

If you are a long-term investor, then it could be a good time to start building a position over the coming months. Chainlink now is the same as it was two years ago; nothing has changed besides market sentiment. However, the current macroeconomic backdrop is still gloomy, which means that accumulating LINK is risky. Further downside is more than likely in the short term. As a result, prudent investors will wait for signs of consolidation and a stabilization in prices before establishing positions.

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts

Frequently Asked Questions

Q

Is now a good time to buy Chainlink?

A

If you are a long-term investor, then it could be a good time to start building a LINK position over the coming months. Fearful environments often present greater opportunities in hindsight to accumulate an asset before the hype picks back up. 

Q

Can Chainlink reach new all-time highs?

A

In light of the current macroeconomic backdrop, it is unlikely that LINK will reach all-time highs any time soon. Investor confidence continues to dwindle as concern that the global economy may enter a recession continues to grow. Moreover, other risk-on assets such as stocks are also underperforming, ultimately suggesting the current bearish climate is being driven by factors far bigger than the cryptocurrency industry.

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