LINK price has broken above crucial resistance areas and is looking to extend its uptrend

By Selena On Apr 20, 2020

The LINK price has recovered more than 180% from the mid-March low, especially for $ 3.84 on Saturday as ParaFi Capital, one of the venture firms backing popular DeFi platform MakerDAO, proposed to collateralize its stablecoin DAI using the LINK cryptocurrency.

LINK price has beaten Bitcoin while emerging as one of the most profitable assets

The firm noted that LINK brings an attractive “market cap, liquidity profile, and appetite for speculation,” which could assist DAI in maintaining its US dollar-peg.

ParaFi stated:

“For context, lending protocol Aave has seen close to $ 20MM in LINK 2 supplied as collateral since launching in mid-January. LINK is valued at over $ 1 billion and is also one of the most liquid ERC-20 tokens available. The token is relatively decentralized with no known “kill-switch” or blacklisting capabilities.”

The speculation has helped bring more users into the Chainlink network. The number of LINK wallets last week has increased by an average of 1,400 per day, leading analysts to predict the price increase trend of LINK.

Congrats to all the #Chainlink holders & #LINK Marines who had strong hands and accumulated more after the crash. We are recovering quickly! Demand is sky high!

? $LINK‘s Performance is Legendary ?

— kevinsvenson_ (@KevinSvenson_) April 18, 2020

There have been quite a lot of predictions about the price of LINK, at least shortly. The LINK-to-dollar exchange rate on Monday jumped 6.26% to $ 3.79, signaling traders’ willingness to keep the prices afloat above crucial support levels. The move uphill brought the pair up by more than 100% on a year-to-date timeframe.

LINK/USD breaks above October 2019 Resistance | Source: TradingView.com

Chainlink’s profit also leads to the price of LINK above the long-term moving average, the 200-daily MA. And when the price of LINK increases, it is also considered as a psychological support factor – a place of LINK token accumulation. That increases the possibility of the cryptocurrency to retest $ 4.10. An extended move above the said level could push LINK’s upside target towards $ 4.81.

$LINK #CHAINLINK

Nice upwards move, but didn’t clear resistance.

Yes, we’ve cleared a high, but the crucial area should be the red zone between $3.72-3.85 to break here.

If can’t break, I’m assuming we’re going to test lower levels and possibly $3 again.

Breaking -> $4.80. pic.twitter.com/GMLdLP4fyA

— Crypto Michaël (@CryptoMichNL) April 18, 2020

In particular, the price of LINK is rising but remains at the risk of profit-taking. When MakerDAO hype fades away, traders can start switching from LINK to Bitcoin or fiat. Part of the reason is that the rapidly spreading coronavirus pandemic has increased the demand for USD between institutional and retail investors.

Another reason for a medium-term price move may be low volume. The price of cryptocurrencies is rising, but with a small volume of transactions, this shows that a smaller number of transactions are participating in the ongoing rally.

That said, it is necessary to maintain stop-loss orders on upside positions to minimize the risk if there is any surprising trend reversal.

Improve DAI’s liquidity with Chainlink

Over the past month, DAI has traded from 200 to 300 bps on its closing rate. The instability poses a significant threat to MakerDAO, potentially pushing DeFi to other decentralized stablecoins, such as Terra or Ampleforth. This is dangerous for Dai liquidity on large exchanges.

ParaFi Capital said:

“Just 10 days ago, we saw CDP 3931 purchase ~5MM DAI, pushing DAI prices to over $1.04. The fact that a top 10 CDP holder was willing to pay 4% above the peg to exit the system is a negative signal.”

An illiquid Dai could have serious implications for the entire DeFi ecosystem, given that it increases the odds for another mass collateral liquidation. Such an unfortunate event has happened before when borrowers on Maker with open CDPs and Vaults were caught on the wrong side of their collateral requirements.

For example, during the March 12 carnage, millions of dollars of collateral were auctioned off for $ 0 while MKR price fell 58% on that day alone, creating a large deficit in MakerDAO’s balance sheet.

Therefore, ParaFi Capital is proposing to on board the Chainlink as a new collateral with market capitalization, liquidity profile, and appetite for speculation. LINK can help increase Dai supply and enhance its stability.

Although the Maker community will have the last word regarding the proposed solution, its implementation is expected to have the same success that Aave has had since launch. Since then, roughly $20 million worth of LINK have been supplied to this lending protocol as collateral.

A similar increase in demand for Chainlink upon its introduction to MakerDAO could see its price spike. This scenario aligns with the outlook provided by different on-chain metrics.

Chainlink’s network growth by Santiment

The decentralized oracle token has seen its network growth grow an average of 1,400 new addresses per day over the past week. Meanwhile, the number of addresses will shift to about 1,150. This is a clear sign that LINK has potential for a further bullish advance, according to Brian Quinlivan, Market and Social Media Director at Santiment.

Quinlivan stated:

“We can see that a rising network growth leads to a rising price of any project over time, in most cases. On the flip side, declining network growth for a long enough stretch can usually indicate a future slumping price with the lack of newly created addresses constantly in-flowing the coin or token.”

Chainlink’s Network Growth | Source: Santiment

Nonetheless, if the bears step in they may find strong support ahead. The IOMAP reveals that 9,600 addresses bought more than 45 million LINK between $3.2 and $3.5. This demand area could prevent Chainlink from a steeper decline.

In/Out of the Money Around Price | Source: IntoTheBlock

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