Eth-based Chainlink (Link) performed incredibly well this year, with its latest price-action pushing the token to surpass bitcoin cash (BCH) as its value topped the $6 billion mark.
Indeed, the decentralised smart contract network has put a smile on many bag-holder faces, having soared almost 80% in a little over a week. Adding to the near 120% gains this month and near-600% rise in the last 12 months, the token has established itself as a firm contender to the top five cryptocurrencies.
The token recently overtook bitcoin cash – a fork of the original bitcoin – valued at $6 billion to BCH’s $5.8 billion, according to figures from CoinMarketCap. Additionally, the token has surpassed Litecoin and Binance Coin in terms of marketcap.
Speaking on the matter, Thomas Kuhn – the head of research and training at Mine Digital – said: “it’s been pretty wild”, referring to Chainlink’s role as the “trinity” alongside bitcoin and Ethereum.
He went on to say that the “effective execution of smart contracts” is a compelling use-case which the market clearly agrees with. Kuhn also believes the current valuations for equities are pushing investors to seek alpha elsewhere, as stocks reach near-all-time highs valuations with the backdrop of an economy that fundamentally tells the opposite story.
With tech stocks at all-time-highs and without yield to be found, I think that we are seeing renewed institutional interest in digital assets, especially in those trading higher when bitcoin is weak or down on the day—these have been DeFi assets.
The price of Chainlink’s token has surged amidst a surge of interest in Decetnralised Finance (DeFi) – which uses cryptocurrency technology to re-create open money markets to issue loans, insurance and other things normally serviced by traditional finance.
To this end, Chainlink’s blockchain network is used by DeFi and other projects in order for them to communicate and connect to external data sources, APIs and payment systems.
According to Kuhn, Chainlink is “one of the more accessible ideas” with regards to DeFi.
Referring to a highly active group – also known as the Chainlink marines – Kuhn said:
On the micro level, the asset has an incredible community, born in 4chan meme culture.
He added: “A major aspect of pricing in link is the question of whether it will be used as an escrow asset for smart contracts.”
“If it is, large values would be needed to be held in escrow for contract execution which would reduce velocity as well as act as an upward price pressure.”
Elsewhere, Chainlink is rumored to be close to offering “staking”—something that will allow link holders to earn passive income from the tokens.
Chainlink corrects sharply but remains in the green
Earlier this month, co-founder of Framework Ventures, one of the biggest private holders of link tokens, Michael Anderson, said Chainlink was still “wildly undervalued”, predicting that the cryptocurrency’s value could shoot up higher than Ethereum’s near the $50 billion price point.
While link has continued to surpass expectations, outperforming altcoins and even bitcoin to a large extent over the last months, the token has witnessed a sharp correction.
Indeed, the token crashed a whopping 20% in just a minute on Tuesday trading (CEST), dropping from $18.6 to $14.7 before recovering to just under $17.
While the long-term trajectory is in tact, it’s conceivable that link might enter a “cool-off” period in the short to medium term given its whopping 1000% plus gains in under a year.
This would also give link onlookers who “missed the boat” the chance to find entry-points at less euphoric levels as the Chainlink market consolidates and the link marines reload.
What’s next for Chainlink?
The euphoria around Chainlink is in large part due to this summer’s feverish activity surrounding decentralised finance (DeFi) applications, which allow users to lend or borrow cryptocurrencies in open money markets.
However, the most popular DeFi applications are largely used to speculate on crypto markets through a technique called yield farming, which more often than not promises short-term returns over 100%.
With its technology, Chainlink essentially delivers price feeds to DeFi applications, powering nearly 95% of all public blockchain derivatives.
The technology “has quickly become the de facto choice” for DeFi applications that outsource their data feeds, according to crypto researcher Messari.
Truth be told, it’s possible that Chainlink might experience a noteworthy correction at some point, espeically when one considers that a DeFi derivative has reached parity with the entire DeFi space.
However, the use-case for the crypto seems to have found a place, and we’ll be eyeing its performance closely as the next cryptocurrency bull run unfolds.