Chainlink MVRV Enters Bearish Zone As LINK Breaks $10, Correction Soon?
23 Ottobre 2023 - 4:00PM
NEWSBTC
On-chain data shows the Chainlink MVRV ratio has shot up as LINK
has rallied above $10, a sign that a steep correction may be due
for the asset. Chainlink 30-Day MVRV Ratio Has Crossed The Bearish
20% Mark As explained by an analyst in a post on X, the last three
times the LINK MVRV ratio hit similar levels as now, the
cryptocurrency registered a sharp drawdown. The “MVRV ratio” (where
MVRV stands for Market Value to Realized Value) is an indicator
that measures the ratio between the Chainlink market cap and the
realized cap. The realized cap here refers to a LINK capitalization
model that assumes the true value of each coin in circulation isn’t
the same as the asset’s spot price, but rather the price at which
the coin last moved on the blockchain. Related Reading: Crypto
Analyst Points Out Bitcoin Sell Signal That Could Be Triggered
Today This price at which the coin was last transferred could be
imagined to be the value at which its holder bought it, so the
realized cap takes into account the prices at which each investor
in the market acquired their LINK. Thus, the realized cap is
essentially a measure of the total amount of capital the holders as
a whole have invested into Chainlink. Since the MVRV ratio compares
the market cap with this metric, it can provide us with info about
the profit/loss situation of the investors. Now, here is a chart
that shows the trend in the 7-day moving average (MA) of the
ChainlinK MVRV ratio over the past year and a half: Looks like the
value of the metric has shot up recently | Source: Santiment on X
Note that in the above graph, the MVRV ratio shown isn’t just the
ordinary version, but rather the 30-day one. What this means is
that this indicator only takes into account the data of coins that
were moved within the past month. From the chart, it’s visible that
the Chainlink 30-day MVRV ratio has observed a strong rise recently
as the price of the cryptocurrency has enjoyed sharp upward
momentum. The metric has crossed the 21% mark with this increase,
suggesting that the investors who bought within the last 30 days
are holding 21% more in value than what they put in. Usually, the
more the profits held by the investors, the greater their
probability of giving in to the allure of profit-taking. As such,
whenever the investors are carrying a high amount of profits, the
risk of a correction taking place can become significant. In the
current case, the Chainlink investors are those who only bought
within the past 30 days, which means that this cohort is bound to
have fickle-minded hands who would easily be tempted to harvest
their gains. Related Reading: Bitcoin Inches Away From Hitting
$31,000 – How High Can BTC Go This Week? As the analyst has marked
in the chart, it would appear that the last three times the MVRV
ratio crossed above 20% for this group, the LINK price observed a
sharp decline. In the first two cases, this drawdown was 34% each,
while in the third and latest one, it was about 14%, which is still
quite a notable drop. If this pattern is anything to go by,
Chainlink may see another such correction soon. LINK Price
Chainlink has seen another 9% rise during the last 24 hours as its
price has now broken above the $10.1 mark. LINK has been going up
in the last few days | Source: LINKUSD on TradingView Featured
image from iStock.com, charts from TradingView.com, Santiment.net
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