Chainlink's Shrinking Supply, Rising Demand Create Bullish Price Outlook

Chainlink (LINK) exchange reserves have declined to two-year lows, signaling potential supply compression that analysts suggest could support continued price expansion. Data from on-chain trackers and market commentators indicate that centralized exchange holdings of LINK tokens have dropped from approximately 195 million in early 2023 to 159.2 million by September 2025, a reduction of 35.8 million tokens. This decline coincides with a significant price rally, as LINK surged from roughly $6–$9 in 2023 to over $24.5 by late 2025, creating a notable supply-demand divergenceChainlink Reserves Near Two-Year Low as Supply Compression May Support Continued Price Expansion, Analysts Say^[1].

The reduction in exchange reserves is not a linear trend but reflects cyclical inflows and outflows. Temporary spikes in deposits occurred during mid-2023, early 2024, and mid-2024, aligning with local price peaks near $12–$18. These inflows are attributed to profit-taking, after which outflows resumed, further tightening liquidityChainlink Reserves Near Two-Year Low as Supply Compression May Support Continued Price Expansion, Analysts Say^[1]. Analyst Quinten noted that persistent outflows suggest long-term accumulation by holders outside centralized exchanges, reducing the pool of immediately tradable tokensChainlink Reserves Near Two-Year Low as Supply Compression May Support Continued Price Expansion, Analysts Say^[1].

Market commentators and exchange balance data corroborate this trend, highlighting that sustained withdrawals and off-exchange accumulation have reduced liquid supply. This dynamic, coupled with rising demand, has created a bullish setup for the token. Over 87.5% of LINK's circulating supply is currently in profit, according to Glassnode, further reducing selling pressureChainlink Supply Crunch: 90% of LINK in Profit as Exchange Reserves Hit Multi-Year Low^[3]. Exchange reserves, now at multi-year lows, suggest a constrained supply environment that could amplify price action if demand strengthensChainlink Supply Crunch: 90% of LINK in Profit as Exchange Reserves Hit Multi-Year Low^[3].

Analysts have tied these on-chain developments to price targets. Quantum Ascend, a market analysis firm, outlined wave targets of $51 (Wave 3), $81 (Wave 4), and $130 (Wave 5), contingent on continued reserve declines or stable supply compression. These projections assume historical patterns-where reserve drops have preceded price rallies-persistChainlink Reserves Near Two-Year Low as Supply Compression May Support Continued Price Expansion, Analysts Say^[1]. However, such outcomes are not guaranteed, as liquidity tightening could also lead to volatility if demand faltersChainlink Reserves Near Two-Year Low as Supply Compression May Support Continued Price Expansion, Analysts Say^[1].

Institutional developments have further bolstered optimism. Chainlink's corporate actions initiative expanded to 24 financial institutions in 2025, including ANZ, Schroders, and Zürcher Kantonalbank, with trials reducing operational costs by 65%. Additionally, a potential U.S. government collaboration and a proposed Bitwise Chainlink ETF, though unconfirmed, have heightened market attentionWill Chainlink Price Climb as Exchange Reserves Collapse?^[2]. These factors, combined with infrastructure upgrades like the Chainlink Reserve, underscore the token's growing role in bridging traditional finance and blockchain ecosystemsChainlink Supply Shock Builds as LINK Eyes Breakout Above $24.5^[4].

Technical indicators present a mixed outlook. While LINK consolidates near $23.58, resistance levels at $24.5–$24.85 are critical for confirming a bullish continuation. The Relative Strength Index (RSI) hovers near neutral territory, and the MACD has turned bearish, indicating waning momentum. However, institutional adoption and constrained liquidity could catalyze a breakout, particularly if demand acceleratesChainlink Supply Crunch: 90% of LINK in Profit as Exchange Reserves Hit Multi-Year Low^[3].

The interplay between supply compression and institutional momentum positions LINK as a key player in tokenized finance. Continued monitoring of exchange balances, order-book liquidity, and regulatory developments will be critical in determining whether the current trend sustains price momentumChainlink Reserves Near Two-Year Low as Supply Compression May Support Continued Price Expansion, Analysts Say^[1].