Chainlink's LINK retests $12.5 support, hints at 20% drop to $10

Chainlink’s [LINK] recent price movements have been closely watched by traders and analysts, as the cryptocurrency retested its $12.5 support level. This retest is significant because it could determine whether the support level will flip into resistance, a scenario that would have substantial implications for LINK's short-term trajectory. The retest of the $12.5 breakout zone hinted at a possible bearish continuation, with on-chain and liquidation data supporting further downside potential towards the $10 and $7.5 levels.

After a week of consistent decline, LINK has been testing a key resistance zone around $12.5, a level that previously acted as a key support. The altcoin’s price action appeared to be a retest of the breakout zone that might now flip into resistance. This retest also alluded to a lack of conviction on the bullish side. If the bulls do not maintain this critical price level, LINK may see a more significant pullback. The broader market remains indecisive, and Chainlink’s recent retracement has been within expectations.

The price has not managed to post a higher high after topping near $16. Retesting the descending trendline at around $12.5 without bouncing convincingly is a sign of a weakening structure. On-chain data seemed to give little reassurance to LINK’s bulls. According to CryptoQuant, the net deposits for the altcoin on exchanges are only slightly above their 7-day average, usually a sign of heightened selling pressure. Higher net deposits generally represent investors pulling funds from decentralized exchanges and sending them over to centralized exchanges with a view to sell. Although the uptick did not exceed the limits, it did coincide with a bearish technical outlook. This convergence may justify LINK’s bearish bias on the charts.

Leveraged traders may further influence LINK’s price trajectory. Liquidation heatmaps revealed a cluster of long liquidation levels near the $10-mark. Market makers like to hunt these liquidity zones during periods of uncertainty. If LINK moves towards $10, triggering liquidations, that selling pressure could trigger a cascade of events. Then, another push to $7.5 — Q4 2023’s previous high — would become probable. The $12.5 zone must hold to avoid deeper losses. With elevated exchange deposits and visible liquidation pools below, the path of least resistance is south for now.