Chainlink Price Drops 6% Amid Key Support Test

Chainlink, a decentralized oracle network, is at a critical juncture, with its price hovering around $13.71 after a 6% decline over the past 24 hours. The asset has reached a key support level of $13.40, which previously acted as a strong reversal point. However, the current market sentiment and structure differ from the past, presenting two potential scenarios for LINK's price movement.

If the ongoing potential accumulation continues and downward pressure eases while LINK holds above the $13.40 level, there is a strong possibility that history will repeat itself. LINK could see a price reversal, soaring by 15% to reach the $15.40 level. This scenario is supported by the heightened participation in LINK's trading volume, which jumped by 7% during the same period.

On the other hand, if the sentiment remains unchanged and the price continues to bleed, it will break down the local support of $13.40 and close a daily candle below the $13 level. In this scenario, LINK could see a price dip of another 18% until it reaches the next support at the $10.40 level. This downward momentum is exacerbated by traders being over-leveraged at $13.35 on the lower side and at $13.81 on the upper side, with $1.14 million and $1.59 million worth of long and short positions, respectively.

Amid this downward momentum, investors and traders are showing renewed interest and confidence in the asset, accumulating tokens in anticipation of a potential reversal. On the 31st of May, 1,788,188 LINK tokens worth $25.53 million were transferred from an exchange to an unknown wallet, indicating potential accumulation as the price continues to drop. This substantial transfer from an exchange to a wallet is typically linked to whales, suggesting that large investors may be positioning themselves for a price rebound.

Furthermore, exchanges have been witnessing continuous LINK outflows, with over $4.49 million worth of LINK tokens being transferred out of exchanges over the past 48 hours. This outflow, amid market uncertainty, suggests potential accumulation by investors and long-term holders, which could help control downward pressure. The current price momentum and market structure present a make-or-break situation for Chainlink, with the asset's price potentially jumping 15% or crashing 18% in the near future.